Gilead Sciences (NASDAQ: GILD): Biomed Play Built on Future Value

Fighting the coronavirus has become one of the biggest talking points of the year. Considering how the virus itself has dominated the news since late February, this isn't much of a surprise. One of the biggest names on the front lines trying frantically to develop protection against this virus is Gilead Sciences (NASDAQ: GILD), a company that has made a lot of headway. While it would be tempting to support that company's work with investment—and who doesn't want to own a piece of the company that cures coronavirus—Gilead's race to a cure seems more built around what it could be worth tomorrow than what it is worth today.

A Slumping Play That Only Recently Recovered

To get the truest understanding of why Gilead is a risky play in biomedical operations, you need only take a look at the company's last year in trading. The company was already a stock with a wide share price range, trading between $60 and $70 per share going back to last July. The first time it broke that $70 range, which it had been trading in since late 2018, was when it hit $72.90 on February 24.

In fact, if you go back five years, you discover that the company had been running in a range of $60 to $80 pretty reliably since about 2016. That was after a massive drop that started in mid-2015, when the company started a depressing slide to the bottom where it sloughed off half its value like a snake shedding skin, going from $118.26 on July 17, 2015 to hit $64.12 on June 16, 2017. A bit of a recovery to $80 kicked in before the company settled into a nearly two-year rut in the $60 to $70 range.

Then, late February and early March 2020 hit, and something wonderful happened for Gilead; the value started a volatile ride upward and made it one of a handful of companies to get past the Massive Indiscriminate Coronavirus Sales Event without a serious dip in its fortunes.  There was a dip in the first half of March, but it recovered, dipped again, and proceeded to recover-and-dip its way through May, June, and into July.

Looking at the consensus picture, meanwhile, is a shaky prospect for further acquisition. The consensus says “hold,” based on 28 ratings. Just three are inclined to sell, but 15 are out to hang on to what's currently on hand. The remaining 10, though, are buy, suggesting a buy might not go amiss.

Making Advances, But How Close Is It?

Much of that high-speed cycle of gain and loss has come on the back of news related to the COVID-19 coronavirus. The company has made, and publicized, several advances in this space that it's working on producing, and the market responded accordingly.

In fact, recent news not only noted success for its remdesivir treatment, but also success for its remdesivir sales department. The latest report, that sent share prices up 3% in premarket trading earlier today alone, noted that for the severely sick, remdesivir reduced risk of death by nearly two-thirds—62%—as compared to just standard care.

Given that remdesivir's last reported cost was at just over $3,100 for a course of treatment, though, that's drawing some significant attention. Given further that the Trump administration bought over half a million treatment courses of remdesivir, though—at a price tag of somewhere around $1.55 billion using the current numbers, and assuming there was no bulk discounting—that's likely to pull some interest from other countries, and mean further sales of remdesivir as well. It will be a while before it's available again, though, as the government purchase took up all of Gilead's July production, and 90% of production through September.

The biggest problem with Gilead Sciences, though, is that it's far from alone in coronavirus treatments. Yes, it's going to have a huge first-mover advantage—as demonstrated by the fact that it's sold almost its next three months worth of production already—but it's also operating in a market full of low-cost alternatives. While remdesivir is proving to be a major treatment option, especially for late-stage coronavirus patients, there are commonly-available alternatives already in play.

Remdesivir was already largely beaten to the late-stage treatment market by dexamethasone, a corticosteroid that was being called a “breakthrough” back in June. And of course, there's the elephant in the room for earlier-stage patients, the controversial hydroxychloroquine / azithromycin / zinc package that recently got a boost from the Henry Ford Health System study that found it cut the death rate “significantly” as well.

So while Gilead Sciences has made one monster of a sale, the question remains, can it make another one in a couple months, when it actually has remdesivir to sell again? Or have Gilead's days of big sales departed for good in favor of lower-cost and widely-available alternatives? The answer to that will make clear whether this is a biomed play you want to get in on.