Today’s new recommendation comes from Stephen Leeb’s The Complete Investor.
“For more than a decade, drug company Gilead Sciences, Inc. (GILD) has been the leading provider of medicines to combat the HIV virus. While growth in sales of its HIV drugs has slowed, it remains in double digits. Moreover, the company is poised to maintain its HIV franchise well into the next decade thanks to new HIV drugs it has developed. The two most exciting are a single pill representing a cocktail of antiviral medications and a medication for the prevention of HIV.
“The most compelling development of the past 18 months was Gilead’s purchase of Pharmasset, a company with proprietary treatments for the hepatitis C virus (HCV), the most common form of hepatitis and one that is notoriously under-diagnosed. Drugs currently on the market have either poor response rates or serious side effects. Gilead’s sofosbuvir, which has successfully completed phase III trials, offers both a broader response rate and fewer side effects. Additional trials will compare sofosbuvir with potential competing medications. Depending on the results, the company could find itself with an HCV franchise generating between $5 billion and $7 billion in revenues. And the upper end could be conservative because of the large number of undiagnosed cases and the possibility the drug could apply to a far broader range of patients than competing drugs cover.
“Even moderate success in the HCV area, when combined with Gilead’s new cancer drugs, could cause growth to reaccelerate sharply. By mid-decade profits could easily top $4.00 a share compared with $1.72 in 2012. Most of the profits — absent another acquisition — should be free cash and lead to substantial share purchases, which might push profits even higher. Strong franchises, the potential for rapid growth, and a valuation less lofty than for many drug companies point to an 18-24 month target of 65-70. Buy Gilead Sciences.”
- Stephen Leeb, PhD., The Complete Investor, April 2013