Gilead on the Fast Track

For pharmaceutical companies, there are several “Holy Grails” in the realm of drug development. One of the most prominent is innovating better ways to treat hepatitis C, which a long list of firms, both big and small, are in hot pursuit of. Gilead Sciences (GILD) is one of the biggest, and as Johanna Bennett discusses in her recent Barron’s piece “Gilead on the Fast Track,” the company may be about to benefit greatly from its hepatitis C drug.

According to Bennett, last week Gilead reported that its experimental oral hepatitis C drug, sofosbuvir had received priority review status from the U.S. Food and Drug Administration. As a result, the agency is expected to render a decision on the medication by Dec. 8. If approved, it would make Gilead the first drug company with an all-oral drug regimen for the hepatitis C virus. GILD’s price has already more than doubled over the past 18 months, Bennett noted.

“Gilead Sciences’ push to develop new oral drugs for hepatitis C continues to captivate investors as shares trade at about 26 times projected earnings over the next four quarters,” Bennett begins. “But don’t let that frighten you away.”

In the piece, Bennett calls on a fellow analyst to support her thesis: “I think it should be trading at 25 times next year’s earnings, not this year’s earnings,” says Geoffrey Porges, an analyst with Bernstein Research. “The stock is cheap for something that could grow earnings at a 25% to 30% compounded rate for the next several years.”

Bennett predicts that there are even better days ahead for the company with sofsbuvir en route. “With regulatory approval approaching, the U.S. launch and a rash of study results on the way, Gilead share price could still climb another 30% as sofosbuvir proves its potential and helps drive the kind of earnings growth investors crave.”

You can find Bennett’s complete take on Gilead here.

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