3 Reasons the Market Is Down on Gilead Sciences
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Transcript of 3 Reasons the Market Is Down on Gilead Sciences
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3 Reasons the Market Is Down on Gilead Sciences
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2013’s Market Darling...
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...Hasn’t Seen the Love Continue
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1. Remember That First Chart?• The stock has doubled over the last year, but if we
zoom out a little more it’s been quite a run.• Some investors are
likely selling to lock-in gains.
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2. Sovaldi, Sovaldi, Sovaldi• Hepatitis C drug approved in Dec.• Multi-billion dollar potential.• Combination product under FDA
review will increase use.• With 2013 revenue of $11.2 billion, Sovaldi sales will have a substantial impact on
Gilead’s earnings.• With reliance, comes worry...
Source: Gilead Sciences
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About Pricing and...
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Competition• AbbVie’s (NYSE: ABBV) combination product is just
a few months behind Gilead’s (Nasdaq: GILD) Sovaldi combination, but it doesn’t appear to be as convenient to take.
• Merck (NYSE: MRK) is further behind, but looks like it has a combination pill that works as well as Gilead’s combo – cure rates in the 95%+ range – and could be taken just once per day. Phase 3 data should be available next year.
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3. The Whole Industry Is Down• Gilead has underperformed the index for the year...
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3. The Whole Industry Is Down• But if you look since the peak, it’s matching the
index.• Investors are
shying away fromthe biotech’s risk.
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Where’s the Bottom?
• Hard to predict.• Pricing issues might blow over, but worry about
competition will continue until Gilead proves its dominance.
• End of industry downturn will be determined by investors’ risk tolerance, which could tighten further.
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Think Long Term
• If you’re planning on holding for multiple years, catching the bottom doesn’t matter too much.
• Gilead is expected to generate its market cap in cash over the next seven years.
• Even if it takes 10 years, it’s a substantial deal for a company with growth potential.
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