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| Gilead Sciences' new blockbuster drug for Hepatitis C, Sovaldi |
Gilead Sciences (GILD) is one of the few biotech companies I see out there with great fundamentals for growth. During yesterday’s earnings report for Q2 2014, the company posted total revenue of $6.54 billion compared to $2.77 billion the same quarter last year, a massive +146% increase.
$3.48 billion or 47% of that came from their new Hepatitis C drug, Sovaldi, which can cure 80% of patients with minimal side effect. More than 3 million Americans have Hepatitis C, but only 70,000 patients initiated treatment with Sovaldi since its launch date, December 2013. The demand is mind-boggling, but the cost of each pill is $1,000 or $84,000 for a common three-month course of treatment.
$3.48 billion or 47% of that came from their new Hepatitis C drug, Sovaldi, which can cure 80% of patients with minimal side effect. More than 3 million Americans have Hepatitis C, but only 70,000 patients initiated treatment with Sovaldi since its launch date, December 2013. The demand is mind-boggling, but the cost of each pill is $1,000 or $84,000 for a common three-month course of treatment.
On the downside for the company, few (three so far) medicaid programs are starting to restrict use of this drug due to the high price it is charging. There is also a wide public outcry calling on the drug maker to lower the price of Sovaldi.
Year to date as of June 30, 2014, Gilead Sciences generated total revenue of $11.28 billion compared to $5.05 billion same time last year, a whopping +123% improvement. $5.75 billion, or 49%, of that came from the sales of Sovaldi. The company finished at net income of $3.66 billion, or $2.20 per diluted share, compared to $772.6 million, or $0.46 per diluted share, same time in 2013, which is a staggering +374% improvement.
The growth potential of this company is phenomenal, but the price of its Hepatitis C product will probably not stay at its current high for a long time. The benefit of lowering the price is that it will undoubtedly give them a larger market share into the 3 million patients the country has. The question is: how much lower?
Gilead Sciences is a company with a high-buy rating for long term, mainly due to its relatively lower P/E ratio, 6 high-demand and successful antiviral products in the market (Sovaldi, Atripla, Truvada, Complera/Eviplera, Stribild, and Viread) each generating over $470 million during half of this year already, numerous drugs under development in their pipelines, and an average of 10,000 deep-pocketed baby boomers retiring everyday.
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