Gilead Sciences, Inc. in the past has shown the ability to tackle challenging epidemics in the viral space. This among other aspects of the company makes it an exciting stock to watch this summer. Investors should consider adding Gilead to their portfolio or increasing their current position.
By Michael A. Mannen, Financial Journalist
In light of the Covid-19 epidemic, public markets around the world have been in turmoil. However, hopefully, this summer yields a more exciting outlook for the public markets. Covid-19 has left many investors scrambling to change their portfolios to cope with the epidemic. The ripple effect Covid-19 has had on the United States economy, however, has created opportunities in certain sectors. This summer can be bright for investors that have a strategy for investing during a crisis.
The Covid-19 recession exacerbated many of the underlying economic problems that the world economy was experiencing prior to the outbreak. For example, artificially low interest rates left many companies over leveraged and without adequate cash on their balance sheet. Similarly, since the 2008 financial crisis, public debt in developing countries has started to mirror corporate debt in the United States. Many companies cannot afford even the temporary loss in revenue caused by Covid-19. Likely, companies in the future will restructure their balance sheets to ensure that they can survive such a pandemic. Moreover, they are likely going to take extra actions to ensure the well-being of their company during another pandemic. This is especially true for international companies that dominate the S&P 500.
However, public healthcare companies have experienced relatively decent increases in their stock price since the Covid-19 outbreak. This is likely due to an increased demand for their services. In this time of crisis, healthcare stocks have become an area of interest for investors. Similarly, metals such as Gold and Silver have really skyrocketed with the recent market plunges. However, during the crisis cash remains the best investment for many investors. Among the healthcare stocks to watch this summer include Gilead ($GILD) . Large market cap healthcare companies like Gilead have performed exceptionally well during the Covid-19 crisis. They will be pivotal to the country’s recovery.
Despite Gilead’s steep five year decline in stock price, this year we have seen a resurgence. Gilead is up nearly 16% year-to-date and there has been a renewed interest in the stock. The Foster City biotech giant is a member of the S&P 500 and is a leader in RNA virus research. They were responsible for pioneering many of the modern HIV therapies that patients depend on today.
Heading into the Covid-19 crisis, Gilead had ample cash reserves and little long-term investments. Unlike most companies they have flexibility to pursue many risky projects. Currently, Gilead is in an arms race with other companies to develop Covid-19 treatments. It’s recent partnership with Roche has ushered in a promising new Phase 3 clinical trial that could mitigate some of the symptoms that Covid-19 patients experience. Considering the imperative need to remove restrictions for businesses, this could substantially increase sales for Gilead’s Remdesivir.
The Phase 3 Clinical Trial will test Covid-19 patients with a combination therapy that includes treatment of Remdesivir and Actemra. Actemera is a regularly prescribed drug to treat inflammation. A recent study published in the New England Journal of Medicine indicates that Covid-19 patients recover faster when treated with the drug. The study found that Covid-19 patients treated with Remdesivir recovered an average of 4 days faster. Combination therapies have been the norm in the treatment of HIV and other infectious diseases.There can be a multiplicative effect and benefit when you combine two therapies. Similar to Actemra, Remdesivir has been shown to improve Covid-19 patient recovery.
In the fight against Covid-19, Gilead is likely to be a winner in the healthcare space. It has the research infrastructure and partnerships necessary to be formidable in the development of Covid-19 therapies. Covid-19 aside, Gilead remains a solid healthcare company due to its fundamentals. In the past decade, Gilead has also seen a substantial decrease in its long-term debt. Gilead’s cash reserve and other short-term investments exceed its long-term liabilities.
However, maybe the biggest factor in evaluating any biotech company remains their drug pipeline. Beyond its financials, Gilead’s pipeline includes many Phase 3 drugs in the areas of fibrotic diseases, oncology, inflammatory disease, and viral treatments. This diverse portfolio will ensure that it has an increased revenue sales in the future. Moreover, in 2019 Gilead has nearly doubled its investment in Research and Development; this year’s budget is surprisingly larger than the National Cancer Institute. Most notably, Gilead’s march acquisition of Forty Seven, Inc gave it access to the promising Phase 3 cancer drug and antibody therapy called Magrolimab. This could likely be a blockbuster product and generate a sizable source of sales revenue for the company in the future.
Gilead has shown a willingness to tackle epidemics in a variety of ways. Outside the lab, Gilead’s community partnerships are impressive considering the international presence of the company. Many of these initiatives are dedicated to helping patients living with HIV.
Other analysts’ ratings on Gilead’s outlook vary considerably. Most notably, SunTrust’s recent upgrade of the stock marks a reversal of their recent rating of Gilead. This could signal a buying pattern among investors and increase volume in the stock. According to MarketWatch, most analysts recommend holding the stock and few recommend selling. For more conservative investors, cash remains a solid investment during any crisis or any turbulent market period.
However, if you are looking to jump into the market, Gilead remains a good place for investors to start buying this summer.