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Biotech major, Gilead Sciences Inc. (GILD - Free Report) , reported better-than-expected results for the fourth quarter of 2016 -- however, shares were down 8.6% immediately after the company reported results. Overall, Gilead’s shares are down 9.3% ever since 4Q results were announced.
Moreover, over the past one year, the company has underperformed the Zacks categorized Medical-Biomedical/Genetics industry with shares declining 25.7% compared to the industry decline of 2.8%.
Why Did GILD’s Shares Decline?
Even though Gilead’s 4Q results surpassed estimates, shares were down due to the company’s 2017 guidance, which fell well short of expectations. Although a decline in sales of the company’s struggling hepatitis C virus (HCV) franchise was largely expected, the magnitude of decline was more than anticipated. The HCV franchise, which delivered sales of about $14.8 billion in 2016, is expected to deliver sales of $7.5 - $9 billion this year. That’s a pretty steep decline for what was once a huge revenue generator for the company. Meanwhile, overall product sales are now expected in the range of $22.5 - $24.5 billion in 2017, down from almost $30 billion in 2016.
Gilead’s HCV franchise has been under pressure for quite a while now given the changing market dynamics. Gilead expects HCV treatment starts to be lower in 2017 than in 2016. The company said that total HCV treatment starts in the U.S. were about 25,000 less than in 2015.
Although Gilead’s HIV franchise should do well, factors like patent expiries, competition, and lack of major product launches/near-term pipeline catalysts will remain an overhang on the shares. In such a scenario, we advise investors to forget Gilead, a Zacks Rank #4 (Sell) stock, and invest in biotech stocks which sport a strong Zacks Rank and have interesting pipelines/products and growth potential.
Our Picks
Celgene Corporation : Summit, NJ-based Celgene is focused on the discovery, development and commercialization of innovative therapies for the treatment of cancer and inflammatory diseases. Blood cancer treatment, Revlimid, is the key contributor to the top-line and continues to deliver impressive growth. Moreover, the Zacks Rank #2 (Buy) stock has been diversifying its portfolio with other drugs like Pomalyst and Otezla -- both drugs crossed sales of $1 billion in 2016. Otezla (psoriasis, active psoriatic arthritis) has immense potential with sales being driven by demand, an expanded U.S. footprint, growing market share and launch in new markets.
Celgene has a rich and promising pipeline as well. In addition to working on expanding the labels of currently marketed products like Revlimid, Pomalyst and Otezla, the company has several late-stage candidates including ozanimod (ulcerative colitis and relapsing multiple sclerosis with regulatory filing expected by year end) and GED-0301 (Crohn’s disease and ulcerative colitis) in the inflammation and immunology therapeutic area and CC-486 (myelodysplastic syndromes and acute myeloid leukemia), enasidenib (acute myeloid leukemia – regulatory application submitted in the U.S. with a decision expected in the second half of 2017) and luspatercept (myelodysplastic syndromes and beta-thalassemia) within hematology. What makes the pipeline more attractive is that quite a few of these candidates have blockbuster potential.
Celgene’s price performance over the past one year shows that the company has outperformed the Zacks categorized Medical-Biomedical/Genetics industry.
Momenta Pharmaceuticals, Inc. : Cambridge, MA-based Momenta specializes in the characterization and engineering of complex drugs. The company has several biosimilar candidates in its portfolio including M923 (a biosimilar version of Humira with regulatory filing expected in mid-2017) and M834 (a biosimilar version of Orencia). Within the complex generics portfolio, Momenta is selling Glatopa, a generic version of Teva’s Copaxone 20 mg, while it is seeking approval with partner Sandoz for the generic version of Copaxone 40 mg. A recent court ruling finding four “method of use” patents covering Copaxone 40 mg invalid bodes well for Momenta. The company also has some novel drug candidates in its pipeline.
Momenta, a Zacks Rank #2 stock, has outperformed the Zacks categorized Medical-Biomedical/Genetics industry over the past one year by a huge margin with the company’s shares gaining 80.7% during this period. Shares shot up earlier this year on the Copaxone ruling.
Fate Therapeutics, Inc. (FATE - Free Report) : San Diego, CA-based Fate is focused on the development of programmed cellular immunotherapies for cancer and immune disorders. The Zacks Rank #2 stock’s immuno-oncology pipeline includes off-the-shelf NK- and T-cell cancer immunotherapies derived from engineered induced pluripotent cells, and immuno-regulatory programs, including hematopoietic cell immunotherapies for protecting the immune system of patients undergoing hematopoietic cell transplantation and for regulating autoimmunity. Immuno-oncology is one of the most lucrative and highly sought after therapeutic areas.
Exelixis, Inc. (EXEL - Free Report) : South San Francisco, CA-based Exelixis is focused on bringing cancer treatments to market. Approved products include Cabometyx (advanced kidney cancer), Cometriq (certain forms of thyroid cancer) and Cotellic (advanced melanoma). Cabometyx is experiencing rapid and broad uptake in the market with label expansion opportunities leaving room for upside. The company has quite a few pipeline catalysts lined up for the coming quarters.
Exelixis, a Zacks Rank #2 stock, has also outperformed the Zacks categorized Medical/Biomedical Genetics industry over the last one year.
Akebia Therapeutics, Inc. (AKBA - Free Report) : Cambridge, MA-based Akebia is focused on delivering innovative therapies to patients with kidney disease through hypoxia-inducible factor biology. The company’s lead pipeline candidate, vadadustat, is in development for the treatment of anemia related to chronic kidney disease in both non-dialysis and dialysis patients. Akebia has a collaboration and license agreement in the U.S. for vadadustat with Otsuka.
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Forget Gilead, Buy These 5 Biotech Stocks Instead
Biotech major, Gilead Sciences Inc. (GILD - Free Report) , reported better-than-expected results for the fourth quarter of 2016 -- however, shares were down 8.6% immediately after the company reported results. Overall, Gilead’s shares are down 9.3% ever since 4Q results were announced.
Moreover, over the past one year, the company has underperformed the Zacks categorized Medical-Biomedical/Genetics industry with shares declining 25.7% compared to the industry decline of 2.8%.
Why Did GILD’s Shares Decline?
Even though Gilead’s 4Q results surpassed estimates, shares were down due to the company’s 2017 guidance, which fell well short of expectations. Although a decline in sales of the company’s struggling hepatitis C virus (HCV) franchise was largely expected, the magnitude of decline was more than anticipated. The HCV franchise, which delivered sales of about $14.8 billion in 2016, is expected to deliver sales of $7.5 - $9 billion this year. That’s a pretty steep decline for what was once a huge revenue generator for the company. Meanwhile, overall product sales are now expected in the range of $22.5 - $24.5 billion in 2017, down from almost $30 billion in 2016.
Gilead’s HCV franchise has been under pressure for quite a while now given the changing market dynamics. Gilead expects HCV treatment starts to be lower in 2017 than in 2016. The company said that total HCV treatment starts in the U.S. were about 25,000 less than in 2015.
Although Gilead’s HIV franchise should do well, factors like patent expiries, competition, and lack of major product launches/near-term pipeline catalysts will remain an overhang on the shares. In such a scenario, we advise investors to forget Gilead, a Zacks Rank #4 (Sell) stock, and invest in biotech stocks which sport a strong Zacks Rank and have interesting pipelines/products and growth potential.
Our Picks
Celgene Corporation : Summit, NJ-based Celgene is focused on the discovery, development and commercialization of innovative therapies for the treatment of cancer and inflammatory diseases. Blood cancer treatment, Revlimid, is the key contributor to the top-line and continues to deliver impressive growth. Moreover, the Zacks Rank #2 (Buy) stock has been diversifying its portfolio with other drugs like Pomalyst and Otezla -- both drugs crossed sales of $1 billion in 2016. Otezla (psoriasis, active psoriatic arthritis) has immense potential with sales being driven by demand, an expanded U.S. footprint, growing market share and launch in new markets.
Celgene has a rich and promising pipeline as well. In addition to working on expanding the labels of currently marketed products like Revlimid, Pomalyst and Otezla, the company has several late-stage candidates including ozanimod (ulcerative colitis and relapsing multiple sclerosis with regulatory filing expected by year end) and GED-0301 (Crohn’s disease and ulcerative colitis) in the inflammation and immunology therapeutic area and CC-486 (myelodysplastic syndromes and acute myeloid leukemia), enasidenib (acute myeloid leukemia – regulatory application submitted in the U.S. with a decision expected in the second half of 2017) and luspatercept (myelodysplastic syndromes and beta-thalassemia) within hematology. What makes the pipeline more attractive is that quite a few of these candidates have blockbuster potential.
Celgene’s price performance over the past one year shows that the company has outperformed the Zacks categorized Medical-Biomedical/Genetics industry.
Momenta Pharmaceuticals, Inc. : Cambridge, MA-based Momenta specializes in the characterization and engineering of complex drugs. The company has several biosimilar candidates in its portfolio including M923 (a biosimilar version of Humira with regulatory filing expected in mid-2017) and M834 (a biosimilar version of Orencia). Within the complex generics portfolio, Momenta is selling Glatopa, a generic version of Teva’s Copaxone 20 mg, while it is seeking approval with partner Sandoz for the generic version of Copaxone 40 mg. A recent court ruling finding four “method of use” patents covering Copaxone 40 mg invalid bodes well for Momenta. The company also has some novel drug candidates in its pipeline.
Momenta, a Zacks Rank #2 stock, has outperformed the Zacks categorized Medical-Biomedical/Genetics industry over the past one year by a huge margin with the company’s shares gaining 80.7% during this period. Shares shot up earlier this year on the Copaxone ruling.
Fate Therapeutics, Inc. (FATE - Free Report) : San Diego, CA-based Fate is focused on the development of programmed cellular immunotherapies for cancer and immune disorders. The Zacks Rank #2 stock’s immuno-oncology pipeline includes off-the-shelf NK- and T-cell cancer immunotherapies derived from engineered induced pluripotent cells, and immuno-regulatory programs, including hematopoietic cell immunotherapies for protecting the immune system of patients undergoing hematopoietic cell transplantation and for regulating autoimmunity. Immuno-oncology is one of the most lucrative and highly sought after therapeutic areas.
Exelixis, Inc. (EXEL - Free Report) : South San Francisco, CA-based Exelixis is focused on bringing cancer treatments to market. Approved products include Cabometyx (advanced kidney cancer), Cometriq (certain forms of thyroid cancer) and Cotellic (advanced melanoma). Cabometyx is experiencing rapid and broad uptake in the market with label expansion opportunities leaving room for upside. The company has quite a few pipeline catalysts lined up for the coming quarters.
Exelixis, a Zacks Rank #2 stock, has also outperformed the Zacks categorized Medical/Biomedical Genetics industry over the last one year.
Akebia Therapeutics, Inc. (AKBA - Free Report) : Cambridge, MA-based Akebia is focused on delivering innovative therapies to patients with kidney disease through hypoxia-inducible factor biology. The company’s lead pipeline candidate, vadadustat, is in development for the treatment of anemia related to chronic kidney disease in both non-dialysis and dialysis patients. Akebia has a collaboration and license agreement in the U.S. for vadadustat with Otsuka.
Akebia is a Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.
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