Gilead (GILD): 'A great company with big catalysts'


"Of all the stocks that I follow and recommend, there is one stock above all others that I have favored for years, and still do: Gilead Sciences (NASDAQ: GILD)," says biotechnology sector expert Michael Shulman.

In his industry-leading ChangeWave Biotech Investor, he explains, "I have owned it for a very-long time and it is fast-growing and rock solid among all of the market uncertainty. When that uncertainty ends, GILD will still be a fast-grower in a recessionary economy."

"The company is a commanding market leader in HIV treatments, sells and collects royalties on other antivirals for flu and Hepatitis B. Gilead recently announced earnings and it had profits of $402 million or 41 cents a share, topping analyst estimates by a penny. It also saw sales grow 22% to $1.1 billion. Despite several product launches and increased clinical trial expenses, the company's cash position doubled to $2.7 billion.

"On a conference call, management said that 2008 would be a very good year, with product sales in the range of $4.7 billion to $4.8 billion. That's more than a 25% increase over 2007 product sales and higher than analyst expectations of $4.6 billion.

"Growth was driven by HIV drug sales, which were up 35% last quarter to $864 million. Management does not guide profit expectations, but the Street has those profits at around $1.88 billion, and Gilead has beaten expectations 14 out of the last 15 quarters.

"Gilead bought Corus Pharmaceuticals and Myogen Inc. -- and GILD has made these acquisitions work for it. With them, Gilead has a new drug for pulmonary arterial hypertension, Letairis, and a potential new drug for cystic fibrosis infections awaiting approval from the FDA.

"Gilead expects an approval for the cystic fibrosis drug and also for its lead HIV drug, Atripla -- recently approved in Europe. Another drug should complete Phase II trials this year, as well. All of these catalysts will supercharge GILD and lead to double-digit sales and profit growth. At current valuations, the stock is cheap, as I believe Gilead will earn in the vicinity of $2 to $2.20 this year, giving it a P/E of 20-22.

"The market is also looking for big-cap names in life sciences, and money is flowing their way, so I expect multiple expansions to hit the stock once the market has stabilized a bit.

"One wildcard in the profits picture is Tamiflu. Gilead gets an 18%-22% royalty on it, and sales by Roche have slowed markedly as pandemic flu fears recede and governments are pulling back on stockpiling the drug. The other wildcard is a stock buyback or new acquisition by GILD. The former would goose the stock, the latter would depress it temporarily.

"The bottom line is that Gilead is a great company and a great stock building a strong base. It's facing several big catalysts and upside earnings surprises in 2008."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

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Last updated: February 10, 2012: 04:08 PM

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