Why Gilead Is Cheapest Large-Cap Biotech Despite Some Not So Favorable Acquisitions

Even after spending over $40 billion in the past five years on acquisitions, none of the deals for Gilead Sciences Inc GILD has delivered the blockbuster in cancer as it looked to venture away from the HIV franchise.

But, the upshot is that the stock is one of the cheapest in the large-cap biotech and pharma sector, writes Wall Street Journal.

2024 sales estimates for Trodelvy, added via a $21 billion buyout of Immunomedics, have been lowered from $2.2 billion to $1.7 billion in recent months, as results from the breast-cancer drug fell short of analyst expectations. 

Related: Gilead Sciences' Trodelvy Study In Breast Cancer Meets Primary Endpoint.

Data on blood-cancer treatment Magrolimab, which Gilead added via the $4.9 billion Forty Seven acquisition, looked "equally unimpressive," wrote an analyst at Baird.

WSJ also notes that Gilead's expensive $12 billion acquisition of Kite Pharma seems to be now paying off. Sales are expected to exceed $1 billion this year easily.

Related: Gilead's Yescarta Scores FDA Approval As First CAR T-Cell Therapy For Earlier Lymphoma.

A Gilead spokesperson wrote, "with more than 50 active or planned trials by the end of next year, the company expects its oncology revenue to represent more than one-third of total revenue by 2030."

According to the report, Gilead should focus on smaller bolt-on deals. In a recent conference, Merdad Parsey, the company's chief medical officer, told Michael Yee from Jefferies that future deals "will not come with an enormous price tag."

Additionally, the high-yielding stock offers a haven in the current bear market thanks to a stable HIV business.

The yield of nearly 5% effectively creates a floor for the shares, which aren't likely to dip below the low $50s, says a BMO analyst.

Price Action: GILD shares are down 2.19% at $57.86 during the market session on the last check Tuesday.

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