Gilead: Pipeline Promise and a Sector-High Yield

04/09/2019 5:00 am EST

Focus: HEALTHCARE

Ned Piplovic

Assistant Editor, Eagle Financial Publications

Gilead Sciences (GILD) is a research-based biopharmaceutical firm involved with treatments for HIV/AIDS, liver diseases, cancer, inflammatory and respiratory diseases and cardiovascular conditions, notes Ned Piplovic, editor of DividendInvestor.

While the company’s share price has been struggling Gilead might be looking to move up because of positive results from a strong clinical trial of its latest arthritis medication.

Gilead and its Belgium-based partner, Galapagos NV (GLPG), released information last week about the clinical trial of their anti-inflammatory medicine, filgotinib, for patients with rheumatoid arthritis. The new medication passed two late-stage trials, met all requirements and moved closer full scale production.

However, nothing is certain yet. Gilead’s main competitors are developing their own treatment of rheumatoid arthritis — although these products are contending with significant side effects.

While not without side effects, Gileads’s filgotinib exhibited similar levels of effectiveness as the competitor’s product, but with more promising safety data and fewer anticipated side effects.

These products are competing for a share of the multi-billion JAK1 inhibitors market. Gilead appears to have a slight advantage and the first shot at the available market. Wall Street analysts’ estimate peak sales range of that drug market segment to be between $1.1 billion and $3.7 billion.

Furthermore, the drug can also be used to treat psoriatic arthritis, ankylosing spondylitis (spinal arthritis) and Crohn’s disease. These drug applications could add up to $3 billion in additional peak sales to the market.

Gilead Sciences has paid a rising dividend every year since introducing dividend distributions in 2015. Since dividend inception, the company has nearly doubled its total annual dividend payout amount. This level of growth corresponds to an average annual growth rate of 18.2% per year.

For its most recent dividend distribution in late March, Gilead Sciences hiked its quarterly dividend payout more than 10% from $0.57 to $0.63 per share. That quarterly rate converts to a $2.52 annualized payout and a 3.84% forward dividend yield — make this the highest yield in the biotechnology segment.

Currently trading at April 2014 levels, the Gilead stock is trying to shift its recent sideways movement into a steady uptrend. The approval and success of filgotinib, would certainly help.

In addition to potentially having a runaway success on its hands, Gilead is also relatively cheap. The company’s 15.8 forward P/E ratio is significantly lower than the market’s 21.6 average.

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