Gilead's [GILD] share price has gained as Wall Street bets on it developing a successful coronavirus treatment. The biopharmaceutical company's candidate Remdesivir has shown promising trial results and received FDA funding. These results are good news for both investors and the wider public.
The company’s strength in HIV treatments is also an ongoing positive that could help Gilead’s share price climb post-earnings.
However, access to the company's other treatments has been limited by the coronavirus outbreak, and Gilead are not the only ones attempting to develop a vaccine.
Both of these are factors that could weigh on earnings, so what could move Gilead's share price following its Q2 results?
What's happening with Gilead's share price?
Gilead's share price is up 13% so far this year. April saw a high degree of volatility in the stock, with sharp spikes and steep sell-offs as the coronavirus rocked the pharmaceutical sector. Since hitting a 52-week high of $85.97 in April, the stock has retreated and been trading in the $72 to $77 range over the summer.
Q2 results will have to deliver something special for Gilead’s share price to break out of this range.
Gilead's YTD share price rise
When are Gilead announcing earnings?
Why should investors care?
Coronavirus vaccine progress
Gilead’s share price has gained on the promise of its COVID-19 vaccine candidate Remdesivir. Phase 3 trials for the treatment showed that it reduced the risk of mortality and produced a marked improvement in clinical recovery.
This was enough to see Credit Suisse bump its Gilead rating from Underperform to Neutral at the start of July. Analyst Evan Seigerman argued Remdesivir receiving FDA authorisation could make a difference to Gilead's profits in the near-term. Seigerman also highlighted that the SPDR S&P Biotech is outpacing the wider S&P by some margin in a note to investors.
If second-quarter results reveal more positive news about the treatment, Gilead's share price could shoot upwards.
Deal for Tizona
July saw Gilead buy half of Tizona for $300m, with the option to buy it outright for a further $1.25bn. Tizona specialises in cancer treatments, and would see Gilead further diversify the treatments it offers.
"Tizona is pursuing first-in-class cancer immunotherapies that could make an important difference in oncology by helping patients who don't respond to current checkpoint inhibitors," said Gilead Chief Executive Daniel O'Day.
Tizona is currently developing the novel cancer treatment TTX-080, with FDA approval for Phase 1 trials to start in the Autumn.
“Tizona is pursuing first-in-class cancer immunotherapies that could make an important difference in oncology by helping patients who don't respond to current checkpoint inhibitors” - Gilead Chief Executive Daniel O'Day
What are analysts expecting for Q2?
Wall Street is predicting Gilead will deliver earnings of $1.48 per share for the second quarter, down from the $1.82 seen for the same period last year. Revenue is expected to come in at $5.34bn, a 6.1% decrease on the $5.68bn seen last year.
Gilead has managed to top Wall Street forecasts in three out of the four most recent quarters, suggesting that the company could beat expectations this time around. Last quarter, Gilead posted earnings of $1.68 a share, well above the expected $1.57.
Gilead's expected revenue - a 6.1% YoY decrease
Q1’s beat was helped by the strong performance of Biktarvy, which was the number one prescribed HIV treatment in the US. Gilead also saw decent uptake for Descovy, an antiretroviral that can both prevent and treat HIV. Zacks is expecting revenue from Biktarvy to come in at $1.7bn and Descovy at $488m in the second quarter.
However, it's worth pointing out that Gilead’s share price is likely to suffer if the expected decline in demand for HIV treatments is realised. The coronavirus has prevented some from accessing them, which could account for the expected drag on revenue.
So, time to buy Gilead?
For all the vaccine discussion, it's worth remembering that Gilead has a solid pipeline of other medicines. The company is a global leader in HIV treatments and, for income-seeking investors, offers a 3.3% forward dividend. Quite apart from coronavirus concerns, it is a high-quality stock.
An average $81.42 price target from the analysts tracking the stock on Yahoo Finance would see a 10.43% upside on Gilead’s share price through 28 July’s close. Of the 28 analysts offering ratings recommendations, Gilead has 16 Strong Buy or Buy ratings and 15 Hold ratings, indicating that analysts are split on the stock's future.
|PE ratio (TTM)||18.70|
|Quarterly Revenue Growth (YoY)||5.1%|
Gilead share price vitals, Yahoo Finance, 29 July 2020