Gilead Sciences' (NASDAQ:GILD) Best Value is Still in the Future

A couple months ago, we took a look at Gilead Sciences (NASDAQ:GILD), whose leading product was a treatment for coronavirus known as remdesivir. Admittedly, things haven't been looking so hot for Gilead in the last two months, but there are some bright points that suggest a turnaround may be coming, and one with a surprising upside.

The Present Doesn't Look so Great for Gilead

To address the elephant in the room immediately, the stock has been on a clear downward trajectory for the last two months. Back on July 10, the company was trading at $76.32. Interestingly, it actually went up from there for a few days before starting a long leg down. The stock closed yesterday at $63.77, which is pretty much the exact opposite of how investors wanted to see things turn out for Gilead.

One major hit for the company came when UnitedHealth sent a notice to those with its insurance plans that it would no longer cover costs for Gilead's Descovy, a drug that offers “pre-exposure prophylaxis” (PrEP) protection against HIV. Instead, the company would be covering Truvada, which was approved for a similar purpose back in 2012, and at the end of this month, would go to a generic schedule, making it much less expensive.

UnitedHealth advised coverage holders that they would need to get their prescriptions changed from Descovy to Truvada before September 1. The generic version would be made available at no out-of-pocket cost, which was likely a welcome development for coverage holders in and of itself. Those who still needed Descovy, meanwhile, needed to be subject to an authorization process and might also have to pay a higher cost for the drug.

Moreover, there was also a bit of analyst trouble. Our recent research found that Truist cut its price target for Gilead from $74 to $67, which is more in line with how it's trading right now.

The Future, However, Has Several Major Possibilities

Granted, that's also what we said two months ago: Gilead's best value remains its future prospects. Looking at the recent developments, however, that assessment remains unchanged.

For instance, the Food and Drug Administration (FDA) in the US recently added to the use cases for Gilead's remdesivir treatment. Now, the drug can be used for any hospitalized COVID-19 patient, thanks in large part to its demonstrated capability in reducing hospital recovery time. There were also greater odds of improvement in certain areas, like the need for oxygen therapy, against patients who were given normal treatments, but it's unclear just how important a development that is.

Gilead has also been working to expand its product line. Between the HIV preventatives and the COVID treatments, Gilead is also set to pick up a new deal with Jounce, reportedly shelling out $685 million for access to Jounce's preclinical cancer treatment known as JTX-1811. While the drug is still in its earliest stages—human testing won't even start until next year, if all goes as planned—it's still a big step forward. It's also one of several similar deals the company has made with firms like Arcus (NYSE:RCUS), Tango, and Tizona, reports note.

There also remains one possibility, spoken of in whispers, that AstraZeneca (LON:AZN) may make a move to acquire Gilead Sciences, or rather, a second move. Gilead reportedly turned away such overtures earlier this year, but given the state of the market—and given the recent setbacks AstraZeneca has had in developing a coronavirus vaccine—the notion might look a bit more appealing all around.

The analysts aren't exactly snubbing the company, either; we found out just yesterday that Oppenheimer boosted its price target on the company to $105, up from the previous $90, and is holding an “outperform” rating on the stock itself.

A Risk, But Still One Worth Considering

Yes, Gilead's stock price has seen better days. And yes, the company has had some setbacks since our look at it two months ago. Yet this doesn't change the surprisingly bright prospects the company has going forward. It's got HIV treatments, it's got several other treatments in the pipeline, it's got one of a handful of therapeutic options to address COVID-19—which is an achievement in and of itself—and a major pharmaceutical firm has been seen making buying overtures for months.

With the stock price down on some recent bad news, it may not be a bad idea to consider picking up a little of this now-discounted potential powerhouse, because it's got a lot up its sleeve yet.