Like most investors, my stock portfolio has taken a serious hit since the year 2016 began. Hence I need to remind myself of a few basic facts.
The stock market is an auction market. It is a convenience to be able to trade your stocks for cash, or vice versa, any given moment of most weekdays. But whether you get a fair price depends on the collective bidding of millions of other people and institutions.
As a long term investor, I need to think of myself as a business owner. A stockholder of a number of important companies. In my case, companies that invent, develop, and provide medicines to people.
A slow down in industrial development in China should not affect the long-term earnings of the biotechnology companies I own.
Things can go wrong, like a promising drug candidate failing to pass a clinical trial. Or an older drug that is making money being replaced by a better drug made by a rival, or eventually going generic.
I am willing to sell some of my stocks to fools if I think the auction price of the stock has gotten well beyond its real long-term value.
And I am willing to buy from fools when stocks I want have fallen below a price that is attractive to me.
But what I think has been going on this week is algorithms chasing algorithms. More than half of trading is typically done by computers, on behalf of real people. Algorithms panic easily.
I am not buying right now because I don't have that much cash in my portfolio. Prices have not reached truly bargain-basement levels. It they do, I will likely transfer some funds into my account in order to do some buying.
I like my Biotech portfolio. I believe that certain stocks, notably Gilead, were already undervalued before the sell off began.
As a stockholder in companies with growing drug portfolios, revenues, and profits, I can wait. If the stock price does not reflect the true value of the company, then the company will return some of the profits to stockholders, by reinvesting, stock-buy backs, or my favorite, increasing the dividend.
But there are many styles of trading stocks and investing in companies. Including those computer algorithms.
The American economy seems to be strong despite weakness in the oil and gas sector. That should ultimately allow better healthcare for Americans, and allow people (and the government and insurers) to afford the new miracle drugs my companies have developed and continue to develop.
Showing posts with label Gilead. Show all posts
Showing posts with label Gilead. Show all posts
Thursday, January 7, 2016
Tuesday, October 6, 2015
Positions Update; bought Alnylam Pharmaceuticals
The biotech meltdown has continued since my last post, mostly due to downgrades of certain stocks, but in the case of Illumina (ILMN), because of an earnings pre-announcement today. I did not buy, but ILMN is getting to a tempting level.
I've been buying selectively, but looked at my Openicon positions page today and noted it is sadly out of date. So I fixed it up. Click on the link and you can see what I currently own with further links to my notes and Seeking Alpha articles.
My only new company is Alnylam Pharmaceuticals (ALNY) which I bought today for $75.13 per share. This is a mostly early-clinical stage company working with RNAi therapy. I've been watching it some time, but too much profit was built into the stock price for me. It could still go lower, especially if negative clinical results come in, but I was comfortable, even pleased, at the price I bought at. It is a stock for investors with a 3 to 10 year time horizon.
I also added to three positions I already had, again because the price was right by my lights:
Gilead Sciences (GILD) on September 28
Mylan (MYL) on September 28
Merrimack (MACK) on October 1.
I am looking forward to Q3 earnings calls.
I've been buying selectively, but looked at my Openicon positions page today and noted it is sadly out of date. So I fixed it up. Click on the link and you can see what I currently own with further links to my notes and Seeking Alpha articles.
My only new company is Alnylam Pharmaceuticals (ALNY) which I bought today for $75.13 per share. This is a mostly early-clinical stage company working with RNAi therapy. I've been watching it some time, but too much profit was built into the stock price for me. It could still go lower, especially if negative clinical results come in, but I was comfortable, even pleased, at the price I bought at. It is a stock for investors with a 3 to 10 year time horizon.
I also added to three positions I already had, again because the price was right by my lights:
Gilead Sciences (GILD) on September 28
Mylan (MYL) on September 28
Merrimack (MACK) on October 1.
I am looking forward to Q3 earnings calls.
Friday, September 25, 2015
Just my luck: the Hillary Clinton biotechnology meltdown
Before looking at the biotechnology meltdown, I'll review my trades since my last report on September 12:
I sold my few shares of Adept Technology (ADEP) because it is being bought out by a Japanese company for $13.00 per share; I took $12.93 rather than wait. I had bought the shares in May for $5.92 per share, so no complaints except that if I had had a crystal ball I would have bought a lot more shares and probably some options too.
With my vast wealth I bought small amounts of:
Medivation (MDVN) at $50.66 per share
Juno Therapeutics (JUNO) at $37.36 per share
and added to my Agenus Bio (AGEN) position for $5.44 per share.
Medivation and Agenus are already down substantially, but Juno is up a notch. I'm not worried, they were all bargains at the prices I paid and I'll be laughing at the panicky sellers in a couple of years. Agenus in particular has an amazing platform that is going to wow people in 2016 and 2017.
Lots of tempting stuff by the end of the day, especially the companies that are already profitable and not dependent on clinical trial results or FDA approval.
Gilead (GILD) is ridiculously undervalued. Cash from operations will continue to flow in, as we'll see when Q3 is reported, and they will continue to buy back stock (as well as pay a nice dividend). It is the opportunity of a lifetime. Don't say no one told you so. Based on trailing earnings GILD is trading at a P/E of 11.4, which means earnings are 8.8% per year and growing. The Hepatitis C cash will keep rolling in as more nations in Europe and elsewhere approve reimbursements.
Presidential candidate Hillary Clinton I'm sure has good intent, and yes, sometimes pharmaceutical companies gouge their customers. But she is complaining when the Orphan Drug laws are doing exactly what they were supposed to do: encourage companies to develop new drugs, which after their patents expire will go generic.
Could the market use some regulation? Perhaps, but I think that except in a few cases the payers and patients can simply not pay prices they think are unfair. Take Gilead's Harvoni. If there are cheaper alternatives (taking into account effectiveness and the cost of side effects), consumers would choose them. But Harvoni is priced fairly compared to prior, less effective treatments with worse side effects. Even the strict European regulators think Harvoni is worth the cost. I doubt Gilead has anything to fear from Hillary Clinton.
This is especially true when you look at political reality. Given the boost that biotech firms give the economies of California and Massachusetts, their congressional delegations are not going to support draconian legislation. Neither are most republicans. Any actual signed legislation will be to make the public feel good while having little impact on most of the drugs most companies sell.
The smartest thing Hillary Clinton (or whomever becomes President) could do for health care would be to use government funds to accelerate the eradication of Hepatitis C (and B) because that would eventually mean no new cases, which would be a great savings to individuals, insurance companies, and Medicare.
I sold my few shares of Adept Technology (ADEP) because it is being bought out by a Japanese company for $13.00 per share; I took $12.93 rather than wait. I had bought the shares in May for $5.92 per share, so no complaints except that if I had had a crystal ball I would have bought a lot more shares and probably some options too.
With my vast wealth I bought small amounts of:
Medivation (MDVN) at $50.66 per share
Juno Therapeutics (JUNO) at $37.36 per share
and added to my Agenus Bio (AGEN) position for $5.44 per share.
Medivation and Agenus are already down substantially, but Juno is up a notch. I'm not worried, they were all bargains at the prices I paid and I'll be laughing at the panicky sellers in a couple of years. Agenus in particular has an amazing platform that is going to wow people in 2016 and 2017.
Lots of tempting stuff by the end of the day, especially the companies that are already profitable and not dependent on clinical trial results or FDA approval.
Gilead (GILD) is ridiculously undervalued. Cash from operations will continue to flow in, as we'll see when Q3 is reported, and they will continue to buy back stock (as well as pay a nice dividend). It is the opportunity of a lifetime. Don't say no one told you so. Based on trailing earnings GILD is trading at a P/E of 11.4, which means earnings are 8.8% per year and growing. The Hepatitis C cash will keep rolling in as more nations in Europe and elsewhere approve reimbursements.
Presidential candidate Hillary Clinton I'm sure has good intent, and yes, sometimes pharmaceutical companies gouge their customers. But she is complaining when the Orphan Drug laws are doing exactly what they were supposed to do: encourage companies to develop new drugs, which after their patents expire will go generic.
Could the market use some regulation? Perhaps, but I think that except in a few cases the payers and patients can simply not pay prices they think are unfair. Take Gilead's Harvoni. If there are cheaper alternatives (taking into account effectiveness and the cost of side effects), consumers would choose them. But Harvoni is priced fairly compared to prior, less effective treatments with worse side effects. Even the strict European regulators think Harvoni is worth the cost. I doubt Gilead has anything to fear from Hillary Clinton.
This is especially true when you look at political reality. Given the boost that biotech firms give the economies of California and Massachusetts, their congressional delegations are not going to support draconian legislation. Neither are most republicans. Any actual signed legislation will be to make the public feel good while having little impact on most of the drugs most companies sell.
The smartest thing Hillary Clinton (or whomever becomes President) could do for health care would be to use government funds to accelerate the eradication of Hepatitis C (and B) because that would eventually mean no new cases, which would be a great savings to individuals, insurance companies, and Medicare.
Tuesday, August 25, 2015
Cashing in Dot HIll,Cantel Medical, Buying Biotechs
I did not foresee the China mini-crisis. But I watched with fascination. Because I had little cash in my account, on August 12 I raised cash by selling my Cantel Medical (CMN) stock, all of it. Cantel is a great company making infection control devices. When I bought it in December of 2009 for $19.58 per share, after hearing about it at Seeking Alpha, it seemed undervalued to me. Since then it split 3 for 2 twice, and when I sold it I got $54.02 per share. No complaints there, it is just a valuation call.
Before I could reinvest that money, Seagate (STX) announced it would buy Dot Hill (HILL). Rather than wait for the transaction to close I sold my HILL at $9.685 per share on August 19. I first bought HILL in 2004 for $7.18 per share. That sounds less than brilliant, but I became a specialist in HILL, mostly selling high and buying low. It has been a very volatile stock. Most of the stock I sold in the end had been bought at $1.00 to $1.40 per share, though I had bought more at $5.67 as late as July 7.
I generally am a careful buyer, doing my homework before buying. But what a sale we have had! An opportunity to buy stocks I wanted, or wanted more of, at better prices.
So this is what I bought:
Star Bulk (SBLK) at $2.39. This is not a biotech.
Epizyme (EPZM) at $15.60.
Gilead (GILD) at $109.18
Amgen (AMGN) at $151.45
GlycoMimetics (GLYC) at $6.84
Inovio (INO) at $6.71
You can read what I think about each of these stocks by checking out William Meyers at Seeking Alpha.
An even higher level of detail is available at my site, openicon.com.
Unfortunately I missed the super Door Busters sale of the opening minutes of Monday the 24th. It is a sort of vacation like week for me and I thought the market would open low and then drift lower during the day. Oh well. I still have quite a bit of the HILL cash and will try to invest it carefully in biotechs, but before they start shooting up too high again.
Keep diversified!
Before I could reinvest that money, Seagate (STX) announced it would buy Dot Hill (HILL). Rather than wait for the transaction to close I sold my HILL at $9.685 per share on August 19. I first bought HILL in 2004 for $7.18 per share. That sounds less than brilliant, but I became a specialist in HILL, mostly selling high and buying low. It has been a very volatile stock. Most of the stock I sold in the end had been bought at $1.00 to $1.40 per share, though I had bought more at $5.67 as late as July 7.
I generally am a careful buyer, doing my homework before buying. But what a sale we have had! An opportunity to buy stocks I wanted, or wanted more of, at better prices.
So this is what I bought:
Star Bulk (SBLK) at $2.39. This is not a biotech.
Epizyme (EPZM) at $15.60.
Gilead (GILD) at $109.18
Amgen (AMGN) at $151.45
GlycoMimetics (GLYC) at $6.84
Inovio (INO) at $6.71
You can read what I think about each of these stocks by checking out William Meyers at Seeking Alpha.
An even higher level of detail is available at my site, openicon.com.
Unfortunately I missed the super Door Busters sale of the opening minutes of Monday the 24th. It is a sort of vacation like week for me and I thought the market would open low and then drift lower during the day. Oh well. I still have quite a bit of the HILL cash and will try to invest it carefully in biotechs, but before they start shooting up too high again.
Keep diversified!
Wednesday, September 17, 2014
GlaxoSmithKline (GSK) and Gilead (GILD)
I remain optimistic about the stocks I invest in. I don't think the stock market is in a bubble, though a few select stocks are, but there are always a few stocks that are highly overvalued at any given time.
My article in Seeking Alpha, published today, is positive about both stocks:
Could GlaxoSmithKline Be A Better Investment than Gilead?
It does feel peculiar that Gilead Sciences has become such a large company in the past decade. But I can only think of one reason that Gilead is not already at $120 or even $140 per share: the vast amount of cash that would need to be invested to get it there. Rather than being in a bubble, in fact investors are rather restrained when it comes to the stock market. Despite federal bonds returning less than the rate of inflation, that is where the stupid money is. Stupid pension money, stupid 401k money. The foreign money in bonds may not be so stupid, given that some national bonds, for instance Germany's, return even lower rates.
Of course, if for some reason the U.S. economy should turn south later this year (perhaps a meteor will strike New York or Washington), markets will fall, and the doomsday specialists will say "I told you so."
I do believe the Federal debt is an overhang that will become an avalanche someday if taxes are not raised, and the earth's environment is in trouble, but those are long-term, not near-term problems for investors.
I currently own Gilead, but not GSK. Gilead is already over 10% of my portfolio, so I may sell some at any time, but my hope is to wait until it is at least $120 per share, and then sell as little as needed to bring it back in line with my portfolio guidelines.
My article in Seeking Alpha, published today, is positive about both stocks:
Could GlaxoSmithKline Be A Better Investment than Gilead?
It does feel peculiar that Gilead Sciences has become such a large company in the past decade. But I can only think of one reason that Gilead is not already at $120 or even $140 per share: the vast amount of cash that would need to be invested to get it there. Rather than being in a bubble, in fact investors are rather restrained when it comes to the stock market. Despite federal bonds returning less than the rate of inflation, that is where the stupid money is. Stupid pension money, stupid 401k money. The foreign money in bonds may not be so stupid, given that some national bonds, for instance Germany's, return even lower rates.
Of course, if for some reason the U.S. economy should turn south later this year (perhaps a meteor will strike New York or Washington), markets will fall, and the doomsday specialists will say "I told you so."
I do believe the Federal debt is an overhang that will become an avalanche someday if taxes are not raised, and the earth's environment is in trouble, but those are long-term, not near-term problems for investors.
I currently own Gilead, but not GSK. Gilead is already over 10% of my portfolio, so I may sell some at any time, but my hope is to wait until it is at least $120 per share, and then sell as little as needed to bring it back in line with my portfolio guidelines.
Tuesday, July 22, 2014
Earnings Tuesday, Wednesday: ISRG, XLNX, BIIB, GILD, ILMN
For the stocks I follow this is a big week of earnings reports. Last week I just had AMD and Seagate (STX) report, and both disappointed by being at average public estimates of analysts.
Intuitive Surgical is first up, holding its analyst conference at 1:30 today. ISRG has been having trouble keeping up the prior pace of its surgical robot sales. But a miss today followed by a stock plunge would present a buying opportunity. ISRG used to have a sky-high P/E, but now it is reasonable, and in the long run I believe surgical robots remain promising.
Xilinx (XLNX) will report at 2:00 PM. Xilinx occupies an obscure but important part of the semiconductor industry. It will be interesting to see how demand was in Q2.
Tomorrow I will be covering Biogen Idec (BIIB) early in the morning. BIIB has been a big winner for me over the last decade. I have no particular expectations for tomorrow, but I will look for anything that might change my long-term model.
Gilead (GILD) is probably the most-followed stock that will report tomorrow, at 1:30 PM. Everyone wants to know how much Sovaldi was sold in the quarter. But watch the HIV, heart and cancer franchises too. I remain very bullish on Gilead in the long run, however any individual quarter sorts out.
And last on my list is Illumina (ILMN), the maker of DNA analysis machines. Again, it will be interesting to see how the quarter went, but that should not have much effect on the long run.
You can read my analyst conference summaries and find links to my articles at Seeking Alpha at the page listing the companies I cover at OpenIcon. Links above go the my pages for the individual companies.
Disclosure: at the time this article was written I owned AMD, XLNX, BIIB, and GILD stock. I did not own the other stocks mentioned, but I am always looking at a good price point to by stocks, and reserve the right to buy them at any time. I am an investor, financial researcher and writer, not a financial advisor, so nothing in this article should be construed as advice or anything other than an opinion.
Intuitive Surgical is first up, holding its analyst conference at 1:30 today. ISRG has been having trouble keeping up the prior pace of its surgical robot sales. But a miss today followed by a stock plunge would present a buying opportunity. ISRG used to have a sky-high P/E, but now it is reasonable, and in the long run I believe surgical robots remain promising.
Xilinx (XLNX) will report at 2:00 PM. Xilinx occupies an obscure but important part of the semiconductor industry. It will be interesting to see how demand was in Q2.
Tomorrow I will be covering Biogen Idec (BIIB) early in the morning. BIIB has been a big winner for me over the last decade. I have no particular expectations for tomorrow, but I will look for anything that might change my long-term model.
Gilead (GILD) is probably the most-followed stock that will report tomorrow, at 1:30 PM. Everyone wants to know how much Sovaldi was sold in the quarter. But watch the HIV, heart and cancer franchises too. I remain very bullish on Gilead in the long run, however any individual quarter sorts out.
And last on my list is Illumina (ILMN), the maker of DNA analysis machines. Again, it will be interesting to see how the quarter went, but that should not have much effect on the long run.
You can read my analyst conference summaries and find links to my articles at Seeking Alpha at the page listing the companies I cover at OpenIcon. Links above go the my pages for the individual companies.
Disclosure: at the time this article was written I owned AMD, XLNX, BIIB, and GILD stock. I did not own the other stocks mentioned, but I am always looking at a good price point to by stocks, and reserve the right to buy them at any time. I am an investor, financial researcher and writer, not a financial advisor, so nothing in this article should be construed as advice or anything other than an opinion.
Sunday, April 27, 2014
Buying the Dip: Inovio, Gilead, Celgene, Amgen, Xilinx
It's been some time since I've posted. I've been busy, not on vacation: researching stocks, fixing up my house in preparation for selling, watching the stock market gyrate, and buying some stocks I think are cheap and are going to look really, really good around 2017:
Since April 11, 2014 I have added to these positions:
Gilead (GILD)
Inovio (INO)
Celgene (CELG)
Amgen (AMGN)
I also bought my first tiny bit of Xilinx (XLNX), which I have watched for years.
I was able to buy these stocks because earlier this year I had sold all of my Adept Technology (ADEP) and bits of Hansen Medical (HNSN) and Dot Hill (HILL). I had also sold some Inovio at $3.65 per share. I bought that back at $2.57 per share.
I considered buying quite a number of other stocks as well, notably (in no particular order): Regeneron (REGN), Alexion (ALXN), and Intuitive Surgical (ISRG). In the end I went for the relatively low P/E biotechs that have proven execution and great pipelines.
I'll write about all this stocks in detail, time permitting, for Seeking Alpha (with any rejections posted here). But quickly, GILD should be trading at $120 per share right now based on its Hepatitis C franchise, HIV franchise, and pipeline of future products. Inovio is risky, but it has many shots on goal in its pipeline. If it misses a shot along the way, while others sell off I will accumulate more.
Celgene still looks to power up to over $300 per share by 2017, but it closed at $142.06 on Friday. How any long-term investor can resist that proposition, I don't know.
Amgen has a low P/E ratio and a great pipeline, and pays a dividend. I hope to buy more if cash becomes available and the price remains low.
Xilinx is a bit of a different nut. It is reasonably priced and pays a dividend, and specializes in field-programmable logic devices. Rival Altera keeps saying they are going to kick Xilinx's ass, when they start producing chips on Intel's 14 nm process. I think Xilinx, which will soon be on TSMC's 16nm process, will be able to hold their own.
I'll probably regret not having bought Regeneron and Alexion down the road, but they just did not dip low enough for my taste. Intuitive Surgical had a really, really bad quarter, but while the stock is much cheaper than it was just a month ago, it still looks pricey if Q1 is just a prelude to further surgery robot sales declines the rest of this year. I'll probably buy some at some point. I like robotics (which is why I still own a large chunk of Hansen Medical shares).
Of course in the short run anything can happen, and in the long run we are all dead. Although I try to use a 3 to 5 year time horizon for picking stocks, and tend to buy and hold, I do adjust my portfolio according to my rules from time to time (limits on how much of anyone stock I own) and also sell some into irrational upward momentum, and buy on irrational dips.
Keep diversified!
See my analyst conference summaries for select stocks at www.openicon.com.
See also William Meyers Seeking Alpha Articles
Since April 11, 2014 I have added to these positions:
Gilead (GILD)
Inovio (INO)
Celgene (CELG)
Amgen (AMGN)
I also bought my first tiny bit of Xilinx (XLNX), which I have watched for years.
I was able to buy these stocks because earlier this year I had sold all of my Adept Technology (ADEP) and bits of Hansen Medical (HNSN) and Dot Hill (HILL). I had also sold some Inovio at $3.65 per share. I bought that back at $2.57 per share.
I considered buying quite a number of other stocks as well, notably (in no particular order): Regeneron (REGN), Alexion (ALXN), and Intuitive Surgical (ISRG). In the end I went for the relatively low P/E biotechs that have proven execution and great pipelines.
I'll write about all this stocks in detail, time permitting, for Seeking Alpha (with any rejections posted here). But quickly, GILD should be trading at $120 per share right now based on its Hepatitis C franchise, HIV franchise, and pipeline of future products. Inovio is risky, but it has many shots on goal in its pipeline. If it misses a shot along the way, while others sell off I will accumulate more.
Celgene still looks to power up to over $300 per share by 2017, but it closed at $142.06 on Friday. How any long-term investor can resist that proposition, I don't know.
Amgen has a low P/E ratio and a great pipeline, and pays a dividend. I hope to buy more if cash becomes available and the price remains low.
Xilinx is a bit of a different nut. It is reasonably priced and pays a dividend, and specializes in field-programmable logic devices. Rival Altera keeps saying they are going to kick Xilinx's ass, when they start producing chips on Intel's 14 nm process. I think Xilinx, which will soon be on TSMC's 16nm process, will be able to hold their own.
I'll probably regret not having bought Regeneron and Alexion down the road, but they just did not dip low enough for my taste. Intuitive Surgical had a really, really bad quarter, but while the stock is much cheaper than it was just a month ago, it still looks pricey if Q1 is just a prelude to further surgery robot sales declines the rest of this year. I'll probably buy some at some point. I like robotics (which is why I still own a large chunk of Hansen Medical shares).
Of course in the short run anything can happen, and in the long run we are all dead. Although I try to use a 3 to 5 year time horizon for picking stocks, and tend to buy and hold, I do adjust my portfolio according to my rules from time to time (limits on how much of anyone stock I own) and also sell some into irrational upward momentum, and buy on irrational dips.
Keep diversified!
See my analyst conference summaries for select stocks at www.openicon.com.
See also William Meyers Seeking Alpha Articles
Thursday, April 10, 2014
Bought More Gilead; Waiting on Regeneron
Just to follow up yesterday's post, this morning I added to my Gilead (GILD) holdings. Investors today are acting like it is a surprise that Gilead will have competition in the Hepatitis C market. Had they not been paying attention?
I believe Gilead can discount its Hep C therapies substantially if necessary to dominate the market, while still having high profit margins. In fact, I have believed all along that Gilead would have done better to price Sovaldi substantially lower and encourage larger numbers of patients to sign up quickly for the treatment. With hundreds of millions of potential patients in the world, they won't run out of patients any time soon, even though the cure rate is extremely high.
I think when Q1 results come out on April 22 we will see the tip of the iceberg for Sovaldi and the coming combination therapies. Gilead had just $139 million in Sovaldi revenue in Q4, and only $50 million made it to patients, the rest being stocking.
I am still hoping to bag some Regeneron (REGN), but even though it is off today at $294, I think it has to be well below $285 now for me to prioritize it over buying more GILD. Of course those who own Regeneron would argue differently, and they could be right.
At $65.19, the price I paid today, Gilead had a trailing P/E of 36.3. With Solvadi and other new drugs coming online, my best guess is still that Gilead will go well over $100 per share by the end of the year. But as with all stocks, Gilead is limited to less than 10% of my portfolio holdings.
For all my background research and published articles on Gilead see: William Meyers on Gilead.
I believe Gilead can discount its Hep C therapies substantially if necessary to dominate the market, while still having high profit margins. In fact, I have believed all along that Gilead would have done better to price Sovaldi substantially lower and encourage larger numbers of patients to sign up quickly for the treatment. With hundreds of millions of potential patients in the world, they won't run out of patients any time soon, even though the cure rate is extremely high.
I think when Q1 results come out on April 22 we will see the tip of the iceberg for Sovaldi and the coming combination therapies. Gilead had just $139 million in Sovaldi revenue in Q4, and only $50 million made it to patients, the rest being stocking.
I am still hoping to bag some Regeneron (REGN), but even though it is off today at $294, I think it has to be well below $285 now for me to prioritize it over buying more GILD. Of course those who own Regeneron would argue differently, and they could be right.
At $65.19, the price I paid today, Gilead had a trailing P/E of 36.3. With Solvadi and other new drugs coming online, my best guess is still that Gilead will go well over $100 per share by the end of the year. But as with all stocks, Gilead is limited to less than 10% of my portfolio holdings.
For all my background research and published articles on Gilead see: William Meyers on Gilead.
Wednesday, February 5, 2014
Xilinx Analysis and Gilead Call
I have a new article at Seeking Alpha:
Xilinx Has A Brighter Future Than Intel
I used Intel as a comparison because it is the best-known of the semiconductor companies.
I also posted my notes on the Gilead Sciences (GILD) Q4 2013 results and analyst call
I think the Gilead results were very good and the coming ramp of Sovaldi for curing hepatitis C infections (HCV) is going to more than justify the current price. However, that is hard to see given the Bear Hug the market is getting so far today.
I believe some stocks are overpriced, but if you are a long-term investor there is a lot of stuff that can be picked up at reasonable prices right now. I am at my portfolio limit for Gilead (near 10% of my holdings) or I would buy more. Because much of the pricing of Gilead is about profits in 2015 and beyond, and the stock has gone up so much in the last 2 years on anticipation of Sovaldi's success, short-term dips in the price should not be a big surprise.
Keep diversified!
Xilinx Has A Brighter Future Than Intel
I used Intel as a comparison because it is the best-known of the semiconductor companies.
I also posted my notes on the Gilead Sciences (GILD) Q4 2013 results and analyst call
I think the Gilead results were very good and the coming ramp of Sovaldi for curing hepatitis C infections (HCV) is going to more than justify the current price. However, that is hard to see given the Bear Hug the market is getting so far today.
I believe some stocks are overpriced, but if you are a long-term investor there is a lot of stuff that can be picked up at reasonable prices right now. I am at my portfolio limit for Gilead (near 10% of my holdings) or I would buy more. Because much of the pricing of Gilead is about profits in 2015 and beyond, and the stock has gone up so much in the last 2 years on anticipation of Sovaldi's success, short-term dips in the price should not be a big surprise.
Keep diversified!
Monday, January 6, 2014
Not so great 2013? A look at the IBB biotechnology index
I thought I beat the market rather nicely in 2013, with a 79% return (see My Great 2013 stock investments). But it turns out that the Nasdaq Biotechnology Index (IBB) closed at 2013 at 227.06 and closed out 2012 at 137.22, for a return of 65.5%. I would say my non-biotech stocks dragged down my portfolio a bit, but my three worst-performing stocks were all biotechs.
While I did beat the IBB, I did not do so by much. Not enough to claim that it was anything outside the normal probability distribution. Many of my biotechs are in the IBB, and some of them account for a lot of market capitalization within the IBB.
So maybe I should save myself some trouble and just buy the IBB. The argument against that can be summed up in my best performing biotech stock in 2013: Inovio, up 530%. INO is not in the IBB.
There are 128 companies in the IBB, and like most indexes they are updated in a way that tends to mask failures. On the other hand one of my worst performers was Dendreon (DNDN) and it is still on the list.
But I will think about adding the IBB as a part of my portfolio. That way if some tiny company gets an unexpectedly good trial result or FDA approval, I'll catch part of it. Along with the companies that have powerful backers on Wall Street, until their innovative therapies fail and investors loose their billions.
Probably I will just keep digging through the data, looking for potential that the sharks have missed. I don't mind the time; science is a hobby of mine. Some times that potential is in fairly large cap companies, not just in the little guys with no approved therapy yet. I first bought Gilead (GILD) in 2007, then Celgene (CELG), Onyx (ONXX) and Biogen (BIIB) in 2008. It took a while for those investments to work out, but my strategy was a long-term one. As far as I am concerned, it beat day trading.
Goldman Sachs pontificated today that biotechnology stocks are generally overvalued. I take a conservative approach to investing, but I look for long term value in product pipelines. I don't know where GILD, BIIB, and CELG will be in a year, but in 5 years they are highly likely to be much more valuable than today [barring the zombie apocalypse, in which case all bets are off].
While I did beat the IBB, I did not do so by much. Not enough to claim that it was anything outside the normal probability distribution. Many of my biotechs are in the IBB, and some of them account for a lot of market capitalization within the IBB.
So maybe I should save myself some trouble and just buy the IBB. The argument against that can be summed up in my best performing biotech stock in 2013: Inovio, up 530%. INO is not in the IBB.
There are 128 companies in the IBB, and like most indexes they are updated in a way that tends to mask failures. On the other hand one of my worst performers was Dendreon (DNDN) and it is still on the list.
But I will think about adding the IBB as a part of my portfolio. That way if some tiny company gets an unexpectedly good trial result or FDA approval, I'll catch part of it. Along with the companies that have powerful backers on Wall Street, until their innovative therapies fail and investors loose their billions.
Probably I will just keep digging through the data, looking for potential that the sharks have missed. I don't mind the time; science is a hobby of mine. Some times that potential is in fairly large cap companies, not just in the little guys with no approved therapy yet. I first bought Gilead (GILD) in 2007, then Celgene (CELG), Onyx (ONXX) and Biogen (BIIB) in 2008. It took a while for those investments to work out, but my strategy was a long-term one. As far as I am concerned, it beat day trading.
Goldman Sachs pontificated today that biotechnology stocks are generally overvalued. I take a conservative approach to investing, but I look for long term value in product pipelines. I don't know where GILD, BIIB, and CELG will be in a year, but in 5 years they are highly likely to be much more valuable than today [barring the zombie apocalypse, in which case all bets are off].
Tuesday, July 30, 2013
New Celgene (CELG) article
I have a new article published today at Seeking Alpha:
Celgene Up Over 100% in a Year. Still a Buy?
I also have an article under editorial review on Gilead (GILD).
Today I hope to write up my thoughts on Biogen Idec as well.
On the whole Celgene, Biogen, and Gilead, plus Onyx Pharmaceutical, have been my best investment segment. Buying them goes back to the time I wrote:
Choosing a Biotechnology Stock
Which, while the specifics have changed, still gives some good tips on what tips to look for if you want to choose individual stocks instead of a biotechnology fund.
Celgene Up Over 100% in a Year. Still a Buy?
I also have an article under editorial review on Gilead (GILD).
Today I hope to write up my thoughts on Biogen Idec as well.
On the whole Celgene, Biogen, and Gilead, plus Onyx Pharmaceutical, have been my best investment segment. Buying them goes back to the time I wrote:
Choosing a Biotechnology Stock
Which, while the specifics have changed, still gives some good tips on what tips to look for if you want to choose individual stocks instead of a biotechnology fund.
Wednesday, October 26, 2011
Biogen Idec, Onyx Pharmaceutical score big
Today two of my biotechnology stocks, Biogen Idec (BIIB) and Onyx Pharmaceuticals (ONXX), are climbing on good results from clinical trials. In Biogen's case results are for daclizumab for multiple sclerosis and for BG-12 for MS as well. Onyx's results are for regorafenib for metastatic colorectal cancer, which is being developed by Bayer, but for which Onyx gets royalties.
This made me think about my now ancient Choosing A Biotech Stock 3 part series. I wrote Part I, the Overview, on September 3, 2007. Was my advice, which I followed, any good?
My hopes were high. I said, "I think some biotechnology stocks are going to be worth a lot more money (better than market returns) in a few years than they are now, and may make me filthy rich if I live to see the long run. I could spread the risk out by buying a lot of different biotechs, or going to a fund. But, well, while I would recommend a fund to anyone too lazy to do their own research, the problem with spreading risk broadly is that you can't get any alpha (profits above typical market) that way."
I already owned Celgene, Dendreon, and Anesiva (which went bankrupt later). I mentioned Gilead Sciences (GILD) and Biogen Idec (BIIB) as being the kinds of companies that I would look at. In Part 2 I took a close look at Gilead. In Part 3 I took a close look at Biogen, but then said that despite their pipeline, "Wow, they have a very strong pipeline (See BIIB pipeline page)," I would buy Gilead first.
Of course after that purchase we had the recession, when most stocks were oversold. I ended up buying Biogen and Onyx as well, and added to each position. The result, so far, has been a mixed bag.
I already owned Celgene, which I first bought in June 2007 for $59.34. I bought more as low as $38.59 in May 2009. As I write it is selling for $66.09.
I first bought Gilead in October 2007 for $42.23. I bought more for $46.55 in February 0f 2010. As I write it is selling for $41.06.
I first bought Biogen in February 2008 for $61.57. I bought more at a low of $46.67 in September of 2008. As I write it is selling for $117.87. Clearly this turned out to be the best investment in the group, so far.
I first bought Onyx in May 2008 for $34.87. My best purchase was for $26.20 in May 2010. As I write it is selling for $39.59.
Clearly Gilead has been the dog of the group, but my selection criteria were pretty good overall. That reminds me, and should remind all of us who are seeking alpha, to keep diversified, even when we have found a sound strategy for investing.
It also reminds me of the importance of patience when doing long-term investing. When a biotechnology company has value in its therapy pipeline, it helps to think in terms of 5 to 10 years, not 5 to 10 days.
This made me think about my now ancient Choosing A Biotech Stock 3 part series. I wrote Part I, the Overview, on September 3, 2007. Was my advice, which I followed, any good?
My hopes were high. I said, "I think some biotechnology stocks are going to be worth a lot more money (better than market returns) in a few years than they are now, and may make me filthy rich if I live to see the long run. I could spread the risk out by buying a lot of different biotechs, or going to a fund. But, well, while I would recommend a fund to anyone too lazy to do their own research, the problem with spreading risk broadly is that you can't get any alpha (profits above typical market) that way."
I already owned Celgene, Dendreon, and Anesiva (which went bankrupt later). I mentioned Gilead Sciences (GILD) and Biogen Idec (BIIB) as being the kinds of companies that I would look at. In Part 2 I took a close look at Gilead. In Part 3 I took a close look at Biogen, but then said that despite their pipeline, "Wow, they have a very strong pipeline (See BIIB pipeline page)," I would buy Gilead first.
Of course after that purchase we had the recession, when most stocks were oversold. I ended up buying Biogen and Onyx as well, and added to each position. The result, so far, has been a mixed bag.
I already owned Celgene, which I first bought in June 2007 for $59.34. I bought more as low as $38.59 in May 2009. As I write it is selling for $66.09.
I first bought Gilead in October 2007 for $42.23. I bought more for $46.55 in February 0f 2010. As I write it is selling for $41.06.
I first bought Biogen in February 2008 for $61.57. I bought more at a low of $46.67 in September of 2008. As I write it is selling for $117.87. Clearly this turned out to be the best investment in the group, so far.
I first bought Onyx in May 2008 for $34.87. My best purchase was for $26.20 in May 2010. As I write it is selling for $39.59.
Clearly Gilead has been the dog of the group, but my selection criteria were pretty good overall. That reminds me, and should remind all of us who are seeking alpha, to keep diversified, even when we have found a sound strategy for investing.
It also reminds me of the importance of patience when doing long-term investing. When a biotechnology company has value in its therapy pipeline, it helps to think in terms of 5 to 10 years, not 5 to 10 days.
Sunday, October 9, 2011
Earnings Preview: AMD, AKAM, GILD, BIIB, CELG
Earnings season is upon us again. Of the stocks I watch most closely (in this case because I own some of each of them), Akamai (AKAM) has scheduled its analyst conference for October 26, and Advanced Micro Devices (AMD) is on October 27. Gilead Sciences (GILD), Celgene (CELG), and Biogen Idec (BIIB) should also report before month's end, but have not yet set dates.
While the information in analyst conferences comes from management, and so can be biased, it is still essential listening for serious investors. At the end sell-side analysts are allowed to ask questions (some micro-caps even let investors ask questions), and on occasion an answer to a question can give important insights into the company. I take notes while I listen and even post them on the web; listen to management for a couple of years and you may be able to tell a lot from the way they answer or evade questions. Going back a few years and checking on how management's predictions worked out can also be illuminating.
Akamai typically is a high P/E stock that has to justify that ratio by showing continuous growth. Many companies have tried to compete with Akamai at accelerated delivery of web content, yet over a decade later Akamai still has incredible market share and has branched out into adjacent businesses like cloud security. Pricing has been an issue lately. Look to see if Akamai's volume of business is growing fast enough to compensate for falling prices. Q3 is a slowish quarter for content delivery, with a big bump coming from e-commerce in Q4, so Q4 guidance is also a key indicator of the health of this business.
AMD already pre-announced, sending the stock price into free-fall. This was as I predicted in AMD at Earnings Crossroad, but worse. The good side of the news is demand for AMD's new server and APU chips is strong. What we want to know from management is how strong is the demand, and how quickly can they gear up chip production to meet the demand.
Biogen Idec (BIIB) guided to low to mid single digit revenue growth over 2011, which for Q3 would run to roughtly $1.2 billion. Tysabri sales over $280 million would be a positive indicator, but the key question is data or FDA approvals for late-pipeline drugs like BG-12 or Daclizumab for multiple sclerosis, which are likely to be announced on other occasions.
Gilead (GILD) is a cash cow that has a low P/E due to patents expiring on some of its anti-viral drugs over the next decade. If management would pay a dividend, the value of the franchise would be more obvious. They are doing a lot of research on new anti-viral compounds that could kick growth into high gear again if approved. Expect something over $2 billion in revenue, $940 million in cash flow from operations. The key issue would be timelines for Endurant and and the "Quad" regimen. Don't expect the stock to budge much in this market until they pay a dividend or announce positive Phase III data for a hepatitis C multi-drug therapy (they are only in Phase II, so it will be a while).
Celgene (CELG) is another cash cow, but with a rapid revenue and profit growth rate (and a higher P/E). Look for Revlimid revenues over $800 million, Vidaza over $165 million or Abraxane, their newest drug, revenues breaking though $100 million in the quarter. Celgene has a pipeline of potential drugs that is so extensive it would take several articles just to go over them. See Celgene drug pipeline for a list. Unless they mostly strike out, anyone who does not buy Celgene at today's price will wish they had in five years, but long-term investors are hard to find in this market.
Disclaimer: I am long in all of these stocks.
While the information in analyst conferences comes from management, and so can be biased, it is still essential listening for serious investors. At the end sell-side analysts are allowed to ask questions (some micro-caps even let investors ask questions), and on occasion an answer to a question can give important insights into the company. I take notes while I listen and even post them on the web; listen to management for a couple of years and you may be able to tell a lot from the way they answer or evade questions. Going back a few years and checking on how management's predictions worked out can also be illuminating.
Akamai typically is a high P/E stock that has to justify that ratio by showing continuous growth. Many companies have tried to compete with Akamai at accelerated delivery of web content, yet over a decade later Akamai still has incredible market share and has branched out into adjacent businesses like cloud security. Pricing has been an issue lately. Look to see if Akamai's volume of business is growing fast enough to compensate for falling prices. Q3 is a slowish quarter for content delivery, with a big bump coming from e-commerce in Q4, so Q4 guidance is also a key indicator of the health of this business.
AMD already pre-announced, sending the stock price into free-fall. This was as I predicted in AMD at Earnings Crossroad, but worse. The good side of the news is demand for AMD's new server and APU chips is strong. What we want to know from management is how strong is the demand, and how quickly can they gear up chip production to meet the demand.
Biogen Idec (BIIB) guided to low to mid single digit revenue growth over 2011, which for Q3 would run to roughtly $1.2 billion. Tysabri sales over $280 million would be a positive indicator, but the key question is data or FDA approvals for late-pipeline drugs like BG-12 or Daclizumab for multiple sclerosis, which are likely to be announced on other occasions.
Gilead (GILD) is a cash cow that has a low P/E due to patents expiring on some of its anti-viral drugs over the next decade. If management would pay a dividend, the value of the franchise would be more obvious. They are doing a lot of research on new anti-viral compounds that could kick growth into high gear again if approved. Expect something over $2 billion in revenue, $940 million in cash flow from operations. The key issue would be timelines for Endurant and and the "Quad" regimen. Don't expect the stock to budge much in this market until they pay a dividend or announce positive Phase III data for a hepatitis C multi-drug therapy (they are only in Phase II, so it will be a while).
Celgene (CELG) is another cash cow, but with a rapid revenue and profit growth rate (and a higher P/E). Look for Revlimid revenues over $800 million, Vidaza over $165 million or Abraxane, their newest drug, revenues breaking though $100 million in the quarter. Celgene has a pipeline of potential drugs that is so extensive it would take several articles just to go over them. See Celgene drug pipeline for a list. Unless they mostly strike out, anyone who does not buy Celgene at today's price will wish they had in five years, but long-term investors are hard to find in this market.
Disclaimer: I am long in all of these stocks.
Wednesday, July 27, 2011
Gilead Sciences Readies Pipeline Value
Gilead Sciences (GILD) is an enourmously profitable company with a cheap stock price, as measured by its Price to Earnings (P/E) ratio. Yesterday Gilead released in second quarter (Q2) 2011 results and held its analyst conference.
A convergence of factors is driving Gilead profits higher. This trend should accelerate in 2012 and continue through at least 2015.
Gilead dominates the anti-retroviral, HIV drugs market in the U.S, where its market share has grown to 70.4%. Its global market share is not as high, but continues to ramp. Gilead AIDS drugs (Atripla, Truvada and Viread) brought in $1.76 billion in the quarter, up 11% y/y. Gilead's therapies are popular because they combine several drugs in a single pill, which makes for good patient compliance.
You might think that in a highly competitive field, with over 70% market share, there would be little upside left. A couple of factors show that thinking is wrong. Recent trials have shown the benefit of starting those infected with HIV much earlier than is currently the case, and that therapy reduces the risk of infection for partners by 96%. The percentage of Americans who are infected and who are already taking Gilead anti-retroviral drugs is estimated to be only 42%. Globally, as nations modernize and become wealthier, the demand for the best HIV therapies is also expanding.
In addition, in 2012 Gilead should be bringing to new combination pills to market, pending FDA approval. Endurant for HIV single tablet regimen of Truvada plus Rilpivirine is likely to get FDA approval in August. The Quad regimen data from two Phase III trials will be released in Q3 2011. In the likely case the data is positive, we should see Quad for sale in the second half of 2012. While some patients may shift from one Gilead pill to another, most the likely course is that Quad and Atripla will continue to take share away from older, non-Gilead therapies.
Branching out from anti-virals, Gilead has made progress with Letairis for pulmonary arterial hypertension, which generated $74 million in revenue. Ranexa for chronic angina hit $86 million in the quarter.
The coming pipeline of Gilead non-HIV drugs is so large that I can only give an overview here and refer you to the conference slide show (see link below). There are even more HIV therapies at stages of the pipeline, including two stand parts of the Quad, Elvitegravir and Cobicistat. There are four hepatitis drugs in phase II, and three in phase I, which will likely be made into a combination therapy for hepatitis C. There are six drugs, mostly in Phase II, with cardiovascular, respiratory and oncology targets.
Gilead had an astonishing free cash flow in the quarter of $943 million. I'd like to see a dividend, but I agree that at this point the stock is so undervalued that buy-backs make a lot of sense. Gilead spent $724 million in buy backs in the quarter. Yet it ended with a cash balance of $5.5 billion. Gilead is in a great position to acquire and develop more drug candidates.
Short of a Black Swan type disaster, I see Gilead as being a much, much larger company by 2020. That is why I own Gilead stock and may continue to acquire it (in a balanced fashion).
But even with a great growth and value combo like Gilead Sciences, there are the usual risks from competition, macroeconomics, failure to execute, etc. See SEC filings for a complete set of risks.
And Keep Diversified!
See also:
my Gilead Sciences Q2 2011 analyst call summary
Gilead Q2 2011 slide show
Monday, April 18, 2011
Analyst Calls this week: Intuitive Surgical, Gilead, Biogen, AMD
Earnings season begins in earnest for me this week. As usual I will be listening to analyst conference calls. All serious investors should, but then again that is time consuming. I take notes and post them on the web for my own and others references. Here are this week's calls and links for my summaries. The pages are up, so you can click on the links, bookmark the pages, and come back when the summaries are ready, often a few minutes after the conference ends, but sometimes up to a day later due to my work load.
Intuitive Surgical (ISRG) analyst call, Tuesday, April 19, 2011 at 1:30 PM
Gilead Sciences (GILD) analyst call, Wednesday, April 20, 2011 at 2:30 PM
Biogen Idec (BIIB) analyst call, Thursday, April 21, 2011 at 1:30 PM
AMD (AMD) analyst call, Thursday, April 21, 2011 at 2:00 PM
I currently have positions in Gilead, Biogen and AMD, but not in Intuitive Surgical.
Wednesday, January 26, 2011
Gilead Sciences, Tamiflu, and Antivirals
Gilead Sciences (GILD) is an enourmously profitable company with a cheap stock price, as measured by its Price to Earnings (P/E) ratio. Yesterday Gilead released in fourth quarter (Q4) 2010 results and held its analyst conference.
Gilead is best known for selling anti-HIV drugs and for Tamiflu for flu, which is sold by Roche. Last year there was a major flu scare, resulting in Q4 2009 royalties including Tamiflu of were $228.0 million. This year royalty revenues were $68.4 million. That is actually up from Q4 2008 royalties of $40.4 million.
Analysts mostly saw 2009 royalty revenues as a one-time event in 2009, but making up for a y/y drop of about $160 million is quite a feat. For the therapies Gilead sells directly, Q4 2010 revenues were up 7% y/y to $1.93 billion versus $1.80 billion. Antiviral product sales were up 5% y/y to $1.7 billion.
Overall revenues were down 2% y/y, but on a very difficult comparison.
How were profits on $2.00 billion in revenues? GAAP net income was $626.4 million. Non-GAAP net income (excluding stock-based compensation and one-time expenses) was $779.3 million. Cash flow from operations was $775 million.
Mostly affecting the stock today was Gilead's stock buy-back plans. In Q4 $614 million was used to repurchase stock. The remaining pre-authorized $2 billion should be used during 2011, and another $2 billion was authorized. Buying back stock has helped keep up earnings per share, which rose, on a non-GAAP basis, to $0.95, up from $0.93 year-earlier despite the lower revenues and non-GAAP net income.
Gilead will be rolling out a number of new therapies over the next few years for HIV and Hepatitis C. In addition, new health guidelines are for physicians to start patients on retrovirals sooner after infection with HIV. This makes for a tremendous pool of new patient adds in the next three years, given that Gilead has a 68.5% share of this market.
Like all major drug inovators, Gilead has had some some potential products that have failed to achieve results. Developing drugs is expensive, and most drug candidates fail to gain FDA approval. You just figure that in as a cost of doing business, spread out over the successful drugs. All drug patents expire eventually, meaning price drops as generics become available, but again that is as it should be, as it spurs companies to continue to search for better drugs. Gilead's upcoming "quad" single pill therapy for HIV is an example of working for continuous improvement instead of sitting still.
Given all that, at some point Wall Street is going to realize that Gilead's PE ratio is too low. In my mind even now it should not be lower than 20. If it rose to 20 tomorrow, from today's 11, the price would run up to $71.35 per share from (as I write) $39.26. Nevertheless, there are risks, including the whims of other investors, so keep diversified!
See also:
my Gilead Sciences Q4 2010 analyst call summary
www.gilead.com
Gilead is best known for selling anti-HIV drugs and for Tamiflu for flu, which is sold by Roche. Last year there was a major flu scare, resulting in Q4 2009 royalties including Tamiflu of were $228.0 million. This year royalty revenues were $68.4 million. That is actually up from Q4 2008 royalties of $40.4 million.
Analysts mostly saw 2009 royalty revenues as a one-time event in 2009, but making up for a y/y drop of about $160 million is quite a feat. For the therapies Gilead sells directly, Q4 2010 revenues were up 7% y/y to $1.93 billion versus $1.80 billion. Antiviral product sales were up 5% y/y to $1.7 billion.
Overall revenues were down 2% y/y, but on a very difficult comparison.
How were profits on $2.00 billion in revenues? GAAP net income was $626.4 million. Non-GAAP net income (excluding stock-based compensation and one-time expenses) was $779.3 million. Cash flow from operations was $775 million.
Mostly affecting the stock today was Gilead's stock buy-back plans. In Q4 $614 million was used to repurchase stock. The remaining pre-authorized $2 billion should be used during 2011, and another $2 billion was authorized. Buying back stock has helped keep up earnings per share, which rose, on a non-GAAP basis, to $0.95, up from $0.93 year-earlier despite the lower revenues and non-GAAP net income.
Gilead will be rolling out a number of new therapies over the next few years for HIV and Hepatitis C. In addition, new health guidelines are for physicians to start patients on retrovirals sooner after infection with HIV. This makes for a tremendous pool of new patient adds in the next three years, given that Gilead has a 68.5% share of this market.
Like all major drug inovators, Gilead has had some some potential products that have failed to achieve results. Developing drugs is expensive, and most drug candidates fail to gain FDA approval. You just figure that in as a cost of doing business, spread out over the successful drugs. All drug patents expire eventually, meaning price drops as generics become available, but again that is as it should be, as it spurs companies to continue to search for better drugs. Gilead's upcoming "quad" single pill therapy for HIV is an example of working for continuous improvement instead of sitting still.
Given all that, at some point Wall Street is going to realize that Gilead's PE ratio is too low. In my mind even now it should not be lower than 20. If it rose to 20 tomorrow, from today's 11, the price would run up to $71.35 per share from (as I write) $39.26. Nevertheless, there are risks, including the whims of other investors, so keep diversified!
See also:
my Gilead Sciences Q4 2010 analyst call summary
www.gilead.com
Sunday, October 24, 2010
Gilead Sciences Rebuilds Optimism for Pipeline
Biotechnology leader Gilead Sciences (GILD) had a good bounce after it reported third quarter earnings on Tuesday, October 19th. Earlier in the year the stock price had slumped on concerns about expiring Gilead patents. HIV therapy Viread, Hepatitis B treatment Hepsera, and Tamiflu for flu all have patents expiring this decade. Was the stock boost because of good sales in the quarter, a renewed stock buy back plan, or because analysts' concerns about replacement income sources for expiring patents were allayed?
Hepsera revenues in the latest quarter were $47.5 million, which is a nice chunk of money, but only 2.4% of the $1.94 billion in total revenues for the quarter. Tamiflu revenues (in the form of royalties from ) expand and contract with the flu season and perceptions of flu virulance; in Q3 they were $34.5 million, or 1.8% of total revenue.
Viread, though, is a much bigger deal. Quarter revenues for straight, one-pill Viread prescriptions were $184.3 million, or 9.5% of total revenue. In addition, Viread is one of three ingredients in Atripla, which brought in $605.3 million. It is also one of the two ingredients in Truvada, which brought in $669 million. So keeping in mind that all patents expire eventually, and every pharmaceutical and biotechnology company has these issues, I will focus on Viread.
Viread is the tradename of Tenofovir, a reverse transcriptase inhibitor, one of several classes of HIV drugs. Viread was approved by the FDA on October 26, 2001, so it has only been available to patients for 9 years. Since 2008 it has also been approved for treatment of chronic Hepatitis B. In the U.S. its patent expires in, but overseas patent laws and expiration dates vary on a per-country basis. Here is a table of Gilead's patent expirations from its 10-K filed with the SEC on March 1, 2010:
Note that Viread patent expiration is seven years away, Truvada and Atripla are 11 years away in the U.S.
It should be noted that the most significant rival for anti-viral products, a joint venture of GlaxoSmithKline and Pfizer, had its patent of Epivir (lamivudine) expired in May 2010. Generic competitors not only hurt Glaxo/Pfizer, but could hurt Gilead's sales. Generics, however, have tended to be used in poorer countries and in earlier stages of HIV infection; they just are not as effective as the newer drugs.
While HIV and hepatitis drugs have greatly improved over the past 30 years, they remain far from perfect. HIV is prone to mutation. Cocktails of drugs are more effective than single drugs, but effects vary by the mix of HIV strains in patients.
Gilead's Atripla is the current status symbol of the war on HIV. Revenues for Q3 grew 23% year over year. Nevertheless, Gilead is trying a number of combinations (including newer drugs with components whose patents will expire beyond 2021), with good results in clinical trials so far. The most promising is the Quad regimen of elvitegravir, cobicistat, tenofovir and emtricitabine, which has completed a Phase II trial; it could complete a Phase III trial by the end of 2011.
Gilead spent $230 million for research and development in Q3. It ended with a cash balance of $5 billion. It is in a good position to acquire further drug candidates or even entire companies that it thinks could add to profits down the road.
Expiring patents should be taken into account, but the first important expiration for Gilead is in 2017. The existence of generics seldom means sales of trademarked drugs drop to zero. It can still use Viread as an ingredient in its combination therapies even after that. New therapies will be ramping revenues well before 2017.
Given that Gilead's non-GAAP trailing Price to Earnings ratio ended Friday at 10.7, for returns of 9.3% per year, I think the stock is a big old buy at this price, especially for investors who are beginning to see the down side of being 100% in low-interest bonds.
The ongoing stock buy-back is just a bonus for shareholders. It keeps pushing up the returns per share of the remaining stock.
For a detailed report on Q3 results see my Gilead Sciences Analyst Conference Call Q3 2010 summary.
But as always, keep diversified!
Hepsera revenues in the latest quarter were $47.5 million, which is a nice chunk of money, but only 2.4% of the $1.94 billion in total revenues for the quarter. Tamiflu revenues (in the form of royalties from ) expand and contract with the flu season and perceptions of flu virulance; in Q3 they were $34.5 million, or 1.8% of total revenue.
Viread, though, is a much bigger deal. Quarter revenues for straight, one-pill Viread prescriptions were $184.3 million, or 9.5% of total revenue. In addition, Viread is one of three ingredients in Atripla, which brought in $605.3 million. It is also one of the two ingredients in Truvada, which brought in $669 million. So keeping in mind that all patents expire eventually, and every pharmaceutical and biotechnology company has these issues, I will focus on Viread.
Viread is the tradename of Tenofovir, a reverse transcriptase inhibitor, one of several classes of HIV drugs. Viread was approved by the FDA on October 26, 2001, so it has only been available to patients for 9 years. Since 2008 it has also been approved for treatment of chronic Hepatitis B. In the U.S. its patent expires in, but overseas patent laws and expiration dates vary on a per-country basis. Here is a table of Gilead's patent expirations from its 10-K filed with the SEC on March 1, 2010:
Products | U.S. Patent Expiration | European Patent Expiration | ||
Vistide | 2010 | 2012 | ||
Hepsera | 2014 | 2011 (with SPC to 2016) | ||
Letairis | 2015 | 2015 | ||
AmBisome | 2016 | 2008 | ||
Tamiflu | 2016 | 2016 | ||
Macugen | 2017 | 2017 | ||
Viread | 2017 | 2018 | ||
Ranexa | 2019 | 2019 | ||
Lexiscan | 2019 | 2020 | ||
Emtriva | 2021 | 2016 | ||
Truvada | 2021 | 2018 | ||
Atripla | 2021 | 2018 | ||
Cayston | 2021 | 2021 (applciation pending) |
Note that Viread patent expiration is seven years away, Truvada and Atripla are 11 years away in the U.S.
It should be noted that the most significant rival for anti-viral products, a joint venture of GlaxoSmithKline and Pfizer, had its patent of Epivir (lamivudine) expired in May 2010. Generic competitors not only hurt Glaxo/Pfizer, but could hurt Gilead's sales. Generics, however, have tended to be used in poorer countries and in earlier stages of HIV infection; they just are not as effective as the newer drugs.
While HIV and hepatitis drugs have greatly improved over the past 30 years, they remain far from perfect. HIV is prone to mutation. Cocktails of drugs are more effective than single drugs, but effects vary by the mix of HIV strains in patients.
Gilead's Atripla is the current status symbol of the war on HIV. Revenues for Q3 grew 23% year over year. Nevertheless, Gilead is trying a number of combinations (including newer drugs with components whose patents will expire beyond 2021), with good results in clinical trials so far. The most promising is the Quad regimen of elvitegravir, cobicistat, tenofovir and emtricitabine, which has completed a Phase II trial; it could complete a Phase III trial by the end of 2011.
Gilead spent $230 million for research and development in Q3. It ended with a cash balance of $5 billion. It is in a good position to acquire further drug candidates or even entire companies that it thinks could add to profits down the road.
Expiring patents should be taken into account, but the first important expiration for Gilead is in 2017. The existence of generics seldom means sales of trademarked drugs drop to zero. It can still use Viread as an ingredient in its combination therapies even after that. New therapies will be ramping revenues well before 2017.
Given that Gilead's non-GAAP trailing Price to Earnings ratio ended Friday at 10.7, for returns of 9.3% per year, I think the stock is a big old buy at this price, especially for investors who are beginning to see the down side of being 100% in low-interest bonds.
The ongoing stock buy-back is just a bonus for shareholders. It keeps pushing up the returns per share of the remaining stock.
For a detailed report on Q3 results see my Gilead Sciences Analyst Conference Call Q3 2010 summary.
But as always, keep diversified!
Sunday, October 17, 2010
AMD, national debt, analyst conference calls update
No, there is no connection between microprocessor design company AMD and the national debt.
This is just to let you know I posted my summary of the AMD Q3 analyst conference call. AMD's profit margin was better than expected, but the real question is how their new processors will do in 2011.
Also, in my more general interest blog, I posted a very serious essay that should be of interest to investors, economists, and policy makers: Save America, Sell Alaska.
Coming up this week: Intuitive Surgical (ISRG) and Gilead Sciences (GILD) report Q3 2001 results on Tuesday after the market closes. As usual I'll be posting summaries of the analyst conference calls. For a list of the companies I cover and the dates they hold their conferences see my Openicon Analyst Conferences Covered page.
This is just to let you know I posted my summary of the AMD Q3 analyst conference call. AMD's profit margin was better than expected, but the real question is how their new processors will do in 2011.
Also, in my more general interest blog, I posted a very serious essay that should be of interest to investors, economists, and policy makers: Save America, Sell Alaska.
Coming up this week: Intuitive Surgical (ISRG) and Gilead Sciences (GILD) report Q3 2001 results on Tuesday after the market closes. As usual I'll be posting summaries of the analyst conference calls. For a list of the companies I cover and the dates they hold their conferences see my Openicon Analyst Conferences Covered page.
Wednesday, July 21, 2010
Gilead, Biogen Idec Second Quarter 2010 Reports
I covered the Gilead (GILD) and Biogen Idec (BIIB) analysts conferences yesterday, July 20, 2010, on my own account. I own stock in both.
You can read the press releases or listen to the recordings, but you can also read my extensive notes: Gilead Sciences Q2 2010 Analyst Conference Summary and Biogen Idec Q2 2010 Analyst Conference Summary.
That's what management said andr reported; here are my reactions. Overall, the biotechnology sector is very much alive, well, and undervalued. Biogen Idec, which specializes in treating multiple sclerosis, but is branching out, had 11% y/y revenue growth and 105% y/y GAAP net income growth.
In other words, profits more than doubled. And they were pretty impressive last year. More important, as time passes PML, a potentially deadly result of unleashing JC virus when the immune system is suppressed, is becoming much less of a problem. It looks like by 2011 it will be possible to screen patients for the presense of JC. Those with out the virus can be expected to switch to Tysabri at a far more rapid rate than we are seeing now. Those who do have JC will be monitored carefully if they take Tysabri; that pools risk also should trend down.
Biogen has an interesting pipeline that could start bearing fruit in 2012. They are diversifying and have the cash flow to buy and develop new products. There will be winners and losers, of course, there always are in biotechnology, but Biogen is now big enough to be sure to have winners in its pipeline. That's what I like to see. I am willing to gamble, on occasion, on a single therapy like I did with Dendreon (DNDN), but most of my portfolio is in companies that have shown they can generate profits.
Gilead has been plagued by analyst's concerns that its anti-viral drugs will go off patent eventually and be undercut by generics. Q2 results again demonstrated the astonishing present value of Gildead: revenues up 17% from year-earlier, net income up 25% y/y. And GAAP net income at $709 million was 36.8% of revenue of $1.93 billion. How often do you see that kind of picture?
The conference was all about the future. There has always been competition in anti-virals. The worry is that other companies are gunning for Gilead's leader-of-the-pack position. I agree with Gilead management, they have an advantage they are likely to keep for a decade or two, and in the meantime can use their giant pile of cash to diversify. Their anti-viral pills only need to be taken once a day; their rivals' best need to be taken twice a day. These pills need to be taken every day for the rest of a patient's life. Missing or delaying one of two daily doses can have serious consequences. So doctors are going to prescibe the one-a-day regimen unless they have a compelling reason to do otherwise.
Most likely scenario: Gilead is going to play in other pharmaceutical's sandboxes, not the other way around. The process will take years, and again not every therapy will get FDA approval or become a blockbuster. But Gilead is a growth and value stock wrapped in one.
Don't just take my word for it. Do your research. To help get started in biotech investing, try my biotechnology research links page.
You can read the press releases or listen to the recordings, but you can also read my extensive notes: Gilead Sciences Q2 2010 Analyst Conference Summary and Biogen Idec Q2 2010 Analyst Conference Summary.
That's what management said andr reported; here are my reactions. Overall, the biotechnology sector is very much alive, well, and undervalued. Biogen Idec, which specializes in treating multiple sclerosis, but is branching out, had 11% y/y revenue growth and 105% y/y GAAP net income growth.
In other words, profits more than doubled. And they were pretty impressive last year. More important, as time passes PML, a potentially deadly result of unleashing JC virus when the immune system is suppressed, is becoming much less of a problem. It looks like by 2011 it will be possible to screen patients for the presense of JC. Those with out the virus can be expected to switch to Tysabri at a far more rapid rate than we are seeing now. Those who do have JC will be monitored carefully if they take Tysabri; that pools risk also should trend down.
Biogen has an interesting pipeline that could start bearing fruit in 2012. They are diversifying and have the cash flow to buy and develop new products. There will be winners and losers, of course, there always are in biotechnology, but Biogen is now big enough to be sure to have winners in its pipeline. That's what I like to see. I am willing to gamble, on occasion, on a single therapy like I did with Dendreon (DNDN), but most of my portfolio is in companies that have shown they can generate profits.
Gilead has been plagued by analyst's concerns that its anti-viral drugs will go off patent eventually and be undercut by generics. Q2 results again demonstrated the astonishing present value of Gildead: revenues up 17% from year-earlier, net income up 25% y/y. And GAAP net income at $709 million was 36.8% of revenue of $1.93 billion. How often do you see that kind of picture?
The conference was all about the future. There has always been competition in anti-virals. The worry is that other companies are gunning for Gilead's leader-of-the-pack position. I agree with Gilead management, they have an advantage they are likely to keep for a decade or two, and in the meantime can use their giant pile of cash to diversify. Their anti-viral pills only need to be taken once a day; their rivals' best need to be taken twice a day. These pills need to be taken every day for the rest of a patient's life. Missing or delaying one of two daily doses can have serious consequences. So doctors are going to prescibe the one-a-day regimen unless they have a compelling reason to do otherwise.
Most likely scenario: Gilead is going to play in other pharmaceutical's sandboxes, not the other way around. The process will take years, and again not every therapy will get FDA approval or become a blockbuster. But Gilead is a growth and value stock wrapped in one.
Don't just take my word for it. Do your research. To help get started in biotech investing, try my biotechnology research links page.
Wednesday, January 27, 2010
Gilead Sciences better than Gold
Gilead Sciences reported Q4 results yesterday, and at last some investors took notice today of just how profitable this company is and will be. Meanwhile the gold bugs may be beginning to see the end of their bubble, as I predicted in The Gold Bubble on November 18, 2009.
Give me a company that has a plan to grow fast any day. In 2010 most of Gilead's revenue and earnings growth will come from the growth of the antiviral market and gaining market share for particular indications like HIV and Hepatitis B within the market. But Gilead has a deep pipeline of therapies that may come online this decade. As always, the number of therapies that are ultimately approved by the FDA are a small percentage of those that come out of preclinical trials. But Gilead has drugs at all phases of development, and they have shown an ability to pick a good percentage of winners in the past.
Revenues were $2.03 billion, up 13% sequentially from $1.80 billion and up 42% from $1.43 billion in the year-earlier quarter.
Net income (GAAP) was $802.2 million, up 19% sequentially from $673.0 million and up 43% from $560.0 million year-earlier.
Earnings per share (EPS) were $0.87, up 21% sequentially from $0.72 and up 47% from $0.59 year-earlier.
A bit of care should be taken in making projections because Gilead receives royalties on Tamiflu. Royalties have been way above their normal levels (reaching$228 million in the quarter) because of the recent flu scare. On the other hand, avoiding Gilead because its Tamiflu royalties fluctuate from quarter to quarter is overlooking the strength of the rest of the company. Product sales (excluding royalties) were up 30% y/y. That is phenomenal growth, and it comes with high profit margins.
While there are always risks and uncertainties, it is very likely Gilead's products will continue to gain market share in 2010. Even if Tamiflu revenues fell to zero, I would consider Gilead undervalued at today's closing price.
For more details, see my Gilead (GILD) Q4 2009 analyst conference summary.
I'll follow up, when I can, with a longer report on Gilead's product pipeline.
I own Gilead stock.
Keep Diversified!
Give me a company that has a plan to grow fast any day. In 2010 most of Gilead's revenue and earnings growth will come from the growth of the antiviral market and gaining market share for particular indications like HIV and Hepatitis B within the market. But Gilead has a deep pipeline of therapies that may come online this decade. As always, the number of therapies that are ultimately approved by the FDA are a small percentage of those that come out of preclinical trials. But Gilead has drugs at all phases of development, and they have shown an ability to pick a good percentage of winners in the past.
Revenues were $2.03 billion, up 13% sequentially from $1.80 billion and up 42% from $1.43 billion in the year-earlier quarter.
Net income (GAAP) was $802.2 million, up 19% sequentially from $673.0 million and up 43% from $560.0 million year-earlier.
Earnings per share (EPS) were $0.87, up 21% sequentially from $0.72 and up 47% from $0.59 year-earlier.
A bit of care should be taken in making projections because Gilead receives royalties on Tamiflu. Royalties have been way above their normal levels (reaching$228 million in the quarter) because of the recent flu scare. On the other hand, avoiding Gilead because its Tamiflu royalties fluctuate from quarter to quarter is overlooking the strength of the rest of the company. Product sales (excluding royalties) were up 30% y/y. That is phenomenal growth, and it comes with high profit margins.
While there are always risks and uncertainties, it is very likely Gilead's products will continue to gain market share in 2010. Even if Tamiflu revenues fell to zero, I would consider Gilead undervalued at today's closing price.
For more details, see my Gilead (GILD) Q4 2009 analyst conference summary.
I'll follow up, when I can, with a longer report on Gilead's product pipeline.
I own Gilead stock.
Keep Diversified!
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