Is Gilead Sciences Worthy of Your Portfolio?

2016 was not a very good year for biotech stocks to say the least. The iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) lost over 20%, as broader market indexes hit new highs. Investors sold off biotech stocks over concerns of drug-pricing fueled by attacks during the Presidential campaign. Hillary Clinton blasted several companies that over-inflated the prices of their drugs and promised to go after the industry and its practices.

After the election, biotech stocks didn’t manage to recoup their losses, as Donald Trump also said that he would do something about the issue of drug pricing. Just a few days ago, Trump boasted about developing a system spurring competition in the drug industry, claiming that “pricing for the American people will come way down”. Well, after seeing Trump and Republicans’ plan to replace the Affordable Care Act, it will be interesting to see what they will do about drug pricing. Following Trump’s latest tweet, a number of pharma stocks took a hit. Nevertheless, since the beginning of the year, biotech stocks have been gaining ground, with IBB having gained nearly 13%.

Gilead Sciences, Inc. (NASDAQ:GILD) was no exception, as its stock plunged by some 27% last year. It is down by another 8% year-to-date, as the company reported a drop in sales and profits for the fourth quarter and issued soft guidance for 2017. Even though its non-GAAP EPS of $2.70 and revenue of $7.32 billion topped the estimates by $0.09 and $150 million, respectively, the figures represented drops of 19% and 14% respectively over the year.

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For its fiscal 2017, the company expects revenue between $22.5 billion and $24.5 billion and Hep C drug sales of between $7.50 billion and $9.00 billion. The company’s hep C drugs also showed a drop in sales in the fourth quarter, as well as other products. However, the company’s HIV franchise has exhibited robust growth and many analysts and investors suggested betting on Gilead particularly for its HIV drugs rather than its hep C pipeline.

There are many reasons why Gilead Sciences, Inc. (NASDAQ:GILD)’s HIV drugs should be the key factor to invest in the stock. These drugs are effective, allowing people to manage their condition throughout their lifetime. At the same time, people with HIV have to take the drugs throughout their entire life, which represents an advantage in comparison with HCV drugs that have to be taken only during a course. Gilead dominates the market in the HIV space and sales of HIV drugs amassed over 40% of Gilead’s sales last year.

On the following page, we will discuss the hedge fund sentiment towards Gilead and see what some top investors think about the company.