(GILD) Archives - Mad Hedge Fund Trader

After countless dinners with pharma execs and more investor conferences than I care to remember, there's one thing I've learned about this sector – these stocks are a lot like the experimental drugs themselves: sometimes miraculous, sometimes disappointing, and always requiring patience.

That brings us to Gilead Sciences (GILD), which has recently pulled off the financial equivalent of finding a $100 bill in an old jacket: a 90% gain since May 2024.

If you're an income-focused investor eyeing GILD's promising yield like a prospector spotting gold, I'd suggest taking a breath before you stake your claim.

After diving into this company's financial innards with the ruthless precision of a veteran hedge fund manager, I've uncovered some fascinating contradictions.

First off, GILD has undergone a remarkable transformation, shedding its growth-focused biotech skin to become what I call a "mature dividend machine" – offering 9 consecutive years of dividend increases since 2015.

Its current annual dividend of $3.16 per share yields 2.99%, significantly outpacing the biotechnology sector average of 1.92%. Not too bad for a company that cut its teeth on groundbreaking HIV and COVID treatments.

But here's where things get interesting. Despite GILD's revenue looking as seasonal as a summer blockbuster (with predictably lower earnings in the first half of each year), the company's fundamentals show troubling signs beneath the surface.

While Q1 2025 revenue was expected to land around $6.77 billion, the company's economic profitability has fallen off a cliff since 2024. Blame it on negative net income in early 2024 and a Cash Tax Rate that jumped from 25.4% to 30.6% faster than a trader fleeing a market crash.

The historical performance tells an even more sobering tale. From IPO to 2015, GILD delivered average annual returns of 32.25% in 79% of years – performance that would make even the most jaded investor whistle.

But since 2015? The stock managed profits in only 50% of years with an anemic average return of 0.99%, which translates to a 2.17% loss when adjusted for inflation. Ouch.

You might say that the entire sector's going through a rough patch these days, and I would have agreed with you except there are several biotechs still performing well.

Take Vertex Pharmaceuticals (VRTX). Those guys are up 36.7% over the past 52 weeks.

Or consider Amgen (AMGN), whose dividend is growing at a mouth-watering 8.94% annually over five years – nearly triple what GILD is serving up to its shareholders.

Even BioMarin (BMRN), a company most retail investors couldn't pick out of a lineup, has been quietly crushing it with 27.3% revenue growth while GILD's top line moves sideways like a crab with performance anxiety.

And don't get me started on Bristol Myers Squibb (BMY). Despite facing their own patent cliff dramas, they're maintaining a forward P/E of just 7.2 – practically giving away shares – while offering a dividend yield of 4.7%.

So, let me tell you something the glossy investor presentations won't: GILD's forward P/E ratio of 13.35x looks attractively cheap compared to the healthcare sector's 20.13x and the S&P 500's 18.60x.

After having had drinks with several institutional investment managers last week, though, I can assure you that discount exists for a reason.

The smart money has correctly identified that this company is no longer growing profitably, and certain whispers about their pipeline aren't inspiring confidence.

For dividend investors hoping to beat inflation while preserving capital, GILD presents a mixed bag. The dividend growth continues but remains stubbornly below inflation, creating a slow leak in real returns.

And, look, I know the Trump White House isn't exactly making life easy for companies like Gilead. Over whiskey last month with a former FDA bigwig (who shall remain nameless), I heard some concerning murmurs about potential cuts to HIV prevention programs.

Bad news when you're sitting on 40% of the U.S. PrEP market like GILD is.

Bottom line? I'm sticking with "hold" for now. The smart money moves when the smart money knows, and my Rolodex isn't flashing buy signals yet.

I've watched enough biotech darlings flame out to know that patience outperforms panic every time.

When GILD shows signs of recapturing that pre-2014 magic, you'll hear it from me before the CNBC talking heads catch wind of it.

February 20, 2025

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 20, 2025
Fiat Lux

Featured Trade:

(PORTFOLIO MANAGEMENT DURING PAIN MANAGEMENT)

(VRTX), (DSNKY), (AZN), (GILD), (SNY), (GSK), (JNJ), (BMY), (LLY)

February 18, 2025

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 18, 2025
Fiat Lux

Featured Trade:

(A TALE OF TWO SHOTS)

(GILD), (MSFT)

A Tale Of Two Shots

Biotech Letter

The smell of antiseptic and sounds of beeping monitors filled the air as I walked through a Tokyo hospital ward back in 1975.

As a fresh UCLA biochemistry graduate working in Japan, I was visiting a friend who had contracted hepatitis B - a common affliction in Asia at the time.

Little did I know that decades later, I'd be analyzing a company that would revolutionize not just hepatitis treatment, but potentially end the AIDS epidemic as we know it.

That company is Gilead Sciences (GILD), and they just delivered a knockout Q4 that has Wall Street's attention.

But the real story here isn't in the numbers - though believe me, we'll get to those. It's about what's coming next.

Last week, Gilead reported Q4 revenue of $7.57 billion, beating estimates by $420 million. Not too shabby for a company some analysts had written off as past its prime.

And here’s another thing that got my attention: their new HIV prevention treatment, lenacapavir, achieved something I've rarely seen in four decades of following biotech - a standing ovation at the AIDS 2024 conference.

Why? Because it worked. Not just worked - it was 100% effective in one trial and 99.9% in another.

For perspective, that's like pitching a perfect game in the World Series, twice. And instead of daily pills, we're talking about two shots per year.

The FDA is expected to weigh in by summer 2025, and after seeing results like these, I'd bet my vintage Japanese sake collection on approval.

The numbers tell quite a story. Gilead's HIV franchise grew 16% year-over-year, with their flagship drug Biktarvy now commanding over 50% market share.

Even with Medicare Part D changes taking a $1 billion bite out of 2025 revenues (thanks, IRA), management still guided for $28.2-28.6 billion in revenue.

That's not just maintaining course - that's sailing straight through a hurricane without spilling your coffee.

Their oncology business isn't sleeping either. Trodelvy hit $1.3 billion in 2024 sales, up 19% from last year.

Their cell therapies Yescarta and Tecartus are performing like seasoned kabuki actors, bringing in $390 million and $98 million respectively in Q4.

On top of these, Gilead has over 50 clinical programs running simultaneously.

For those keeping score at home, that's more shots on goal than a World Cup final. And they don't face any major patent cliffs until late 2033 - practically an eternity in biotech years.

Speaking of shots on goal, let's talk about that stock price.

Shares have climbed from $71 to around $100 since my last recommendation. Not bad, but given what's in the pipeline, I think we're still in the early innings here.

The company's latest breakthrough, Livdelzi for liver disease, already pulled in $30 million in its first quarter.

Some analysts are talking about $2 billion in peak sales - and having seen my share of liver disease cases during my time in Asia, I wouldn't be surprised if they're being conservative.

Looking ahead to 2025, Gilead has several potential catalysts.

Two major Trodelvy trial readouts, potential lenacapavir approvals worldwide, and expansion into new markets.

They've come a long way since their Harvoni glory days of 2015, transforming from a one-hit wonder into a diversified powerhouse.

Is the stock cheap? Not as cheap as when I first recommended it. But with lenacapavir looking like it could change the game in HIV prevention, this feels like watching Microsoft (MSFT) in the early days of Windows - you know something big is coming, even if you can't quite see the whole picture yet.

The last time I saw scientific results this promising was during China's opening up in the late 1970s, when decades of isolated research suddenly became available to the world.

As for my friend from that Tokyo hospital? He recovered fully, thanks to medical advances that seemed impossible at the time.

Today's impossibilities have a funny way of becoming tomorrow's breakthroughs - and that's exactly why I'm rating Gilead a strong buy on any dips.

December 24, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 24, 2024
Fiat Lux

Featured Trade:

(THE LAB RESULTS ARE IN)

(GILD), (TSLA), (WVE), (EDIT), (CRSP), (LLY), (NVO), (WMT), (CVS), (CCCC), (RHHBY)

The Lab Results Are In

Biotech Letter

I found myself gridlocked in Bay Area traffic a few days ago, inching past Gilead's (GILD) sprawling Foster City headquarters, when my phone lit up with a call from an old friend at Goldman.

“Alright, tell me—what’s the real story with biotech this year?” she asked, her tone hovering somewhere between curiosity and exasperation. “Half my portfolio feels like a masterstroke, the other half... well, let’s just say it’s testing my patience.”

As I watched a Tesla (TSLA) weave through traffic like it was auditioning for a Fast & Furious reboot, I smiled.

Biotech has always been a bit of a high-stakes chess game—brilliance in one corner, chaos in another, and always a few surprises lurking behind the next move.

“Let me break it down for you,” I said, steering the conversation as carefully as I did my car through the bumper-to-bumper maze.

First, the winners are crushing it, and I mean crushing it. Gilead (GILD) finally cracked the code on HIV treatment, developing what's essentially a vaccine that doesn't require popping pills like they're Tic Tacs.

My contacts in clinical development tell me the Phase 3 data in cisgender women is nothing short of spectacular. With a $6 billion annual market potential by 2028, this isn't just another incremental advance - it's the kind of breakthrough that makes everyone in biotech salivate.

Then there's Wave Life Sciences (WVE) and their RNA editing technology. Remember when we thought CRISPR was the only game in town? Well, Wave just showed us there's more than one way to edit a gene.

Their liver-targeting therapy is the first successful RNA editing in humans - think of it as spell-check for your DNA, but reversible. The market's currently at $1.1 billion, but with 35% CAGR through 2030, this train is just leaving the station.

Speaking of trains leaving stations, molecular glue developers like C4 Therapeutics (CCCC) are watching Big Pharma back up the Brink's truck.

We're talking $8 billion in licensing deals this year alone. After all, when Roche (RHHBY) drops $300 million upfront - not milestone payments, mind you, but cold hard cash - you know they've seen something special in the data room.

But here's where it gets interesting, and I had to pull over at this point in the conversation because my friend wasn't going to like what came next.

CRISPR stocks? Down 20%. Editas (EDIT) and CRISPR Therapeutics (CRSP) are learning that revolutionary science doesn't always translate to revolutionary returns.

My friend Janet at the Fed might be talking about higher rates, but these companies are bleeding cash faster than a Silicon Valley startup's WeWork budget.

The obesity market? Unless your name is Eli Lilly (LLY) or Novo Nordisk (NVO), you're probably not having a great time.

Only three startups cleared $100 million in funding this year. In biotech terms, that's like trying to build a house with pocket change.

The global market's sitting at $4.1 billion, but it's more crowded than a San Francisco coffee shop during a tech conference.

And don't get me started on Walmart (WMT) and CVS (CVS) trying to play doctor. They thought they could disrupt traditional healthcare with their “get your physical next to the garden tools” model.

The result? A combined loss of $250 million and a wave of clinic closures.

The lesson here is clear: just because you can sell lightbulbs and Band-Aids in the same aisle doesn’t mean you should try to diagnose strep throat next to the automotive department.

A kid in a modded Subaru WRX cut me off as I wrapped up the call, but I left my friend with this: In biotech, timing is everything.

Gilead and Wave are showing us that patience pays off when the science is solid. Meanwhile, CRISPR stocks remind us that even the most promising technology needs good timing and deep pockets.

So, watch those clinical trial results like a hawk, and keep an eye on where the venture money's flowing.

But most importantly, remember what my old mentor used to say: "In biotech, you're not just betting on the science - you're betting on the scientist, the CFO, and sometimes, just sometimes, on whether people are ready to get their flu shot next to the garden center."

Now, where's that highway patrol when you need them?