A lot of people are talking about Gilead Sciences (NASDAQ:GILD) these days. The big biotech's antiviral drug remdesivir has made headlines because of its promise in treating novel coronavirus disease COVID-19. Some people had never even heard of Gilead before its COVID-19 program garnered widespread publicity.
But Gilead Sciences has been around a long time. The company was founded in 1987. It's also made early investors quite wealthy. Gilead conducted its initial public offering (IPO) at the end of January in 1992. Here's how much money you'd have now if you'd invested $10,000 in Gilead's IPO.
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A ginormous return
Gilead Sciences priced its shares at $15 before its IPO. However, the biotech stock opened for trading at a little over $22 per share -- a gain of nearly 47% right off the bat for early investors.
The euphoria didn't last very long. Gilead lost roughly half of its market cap over the next few months. The stock rebounded, though, and finished its first calendar year of trading up 28% from its IPO price.
Over the next few years, Gilead continued to take shareholders on a roller coaster ride. But in 1995, the stock took off. Gilead's shares were highly volatile during the rest of the decade but trended up sharply overall.
The dawn of the 21st century ushered in a golden period for Gilead Sciences. Its stock skyrocketed. By mid-2008, Gilead was up by a staggering 5,660% adjusted for stock splits. Like many stocks, the financial crisis of 2008 and 2009 weighed on the biotech's shares. But that was only temporary.
Gilead stock went on to hit an all-time high in June 2015. At that point, anyone who had invested $10,000 in the company's IPO and held on would have had a position worth nearly $2.6 million. Unfortunately, it was mainly downhill from there. Still, though, a $10,000 investment in Gilead's IPO would now be worth nearly $1.8 million. That's a ginormous return of more than 17,800%.
Behind Gilead's success
Gilead won its first FDA approval in 1996 for Vistide in treating AIDS patients with cytomegalovirus retinitis, an inflammatory eye disease that can cause blindness. Vistide was the beginning of a long and successful road for Gilead in treating HIV-related conditions.
The biotech's rapid rise in the early 2000s stemmed from the launches of HIV drugs Viread (in 2001) and Truvada (in 2004). In 2006, the FDA approved Atripla -- a combination of Truvada and Bristol Myers Squibb's Sustiva.
Gilead also made some key acquisitions along the way that enabled it to move into new therapeutic areas. One of the most significant of these was the 2009 purchase of CV Therapeutics, a deal that brought cardiovascular drug Ranexa into Gilead's lineup.
But the most important acquisition by far for Gilead was its buyout of Pharmasset in 2011. That deal led to Gilead launching Sovaldi in 2013. Sovaldi was the first drug to cure hepatitis C. It was followed by Gilead's other hepatitis C virus (HCV) drugs Harvoni, Epclusa, and Vosevi.
By the second half of 2015, though, it became obvious that Gilead would be a victim of its own success. There were fewer HCV patients because so many had been cured by Gilead's drugs and new rivals that had entered the picture. Gilead's HCV franchise sales soon began to sink, dragging down the company's overall revenue, earnings, and share price.
However, Gilead still had its powerhouse HIV franchise. The company launched a new generation of HIV drugs, culminating in the introduction of Biktarvy in 2018. Biktarvy is on track to become the most successful HIV drug to date.
Gilead also continued to invest in business development. Its 2017 acquisition of Kite Pharma made Gilead an instant leader in the promising area of cell therapies for treating cancer.
What lies ahead
HIV remains a core area of focus for Gilead Sciences. The biotech is developing a long-acting capsid that could be a major catalyst in the not-too-distant future. Gilead is also evaluating drugs that could potentially cure HIV in early stage clinical studies.
There are two things to watch with Gilead in the near term. The company expects to soon announce results from late-stage testing of remdesivir in treating COVID-19. Positive news wouldn't just be good for Gilead; it would be good for the world as countries continue to battle the coronavirus pandemic.
Gilead also awaits U.S. and European approvals for filgotinib in treating rheumatoid arthritis. The drug is widely expected to become a megablockbuster. Filgotinib, and Gilead's close partnership with its developer, Galapagos, could put the big biotech in a prominent position in the huge immunology market.
Don't look for the staggering returns from Gilead that it's delivered over the past 28 years. However, with solid growth prospects plus a nice dividend, the biotech stock seems likely to deliver good total returns to investors over the next decade.
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April 19, 2020 at 08:01PM
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