Gilead
Gilead will be raising $6 billion in debt to fund the deal. Gilead's shares were 5% higher following the deal's announcement. Analysts expect the deal to add to Gilead's top-line by $750 million per year.
Trodelvy
Gilead's primary motivation is to acquire Trodelvy from Immunomedics which is a drug for metastatic triple-negative breast cancer. It's also being studied and developed to use as a treatment for bladder cancer, lung cancer, and other tumors.
Gilead is looking to increase its share of cancer treatments given that its second in terms of the cause of death. Previously, it purchased Kite Pharmaceuticals for its T cell receptor therapy which helps patients' immune systems better fight cancer. Over the last couple of years, it's also invested $5.1 billion in Galapagos and $4.9 billion in FortySeven to augment its pipeline.
So far, this hasn't translated into approval of any blockbuster drugs. The company took another blow when its arthritis drug, Filgotinib, was denied approval by the FDA.
Gilead's Recent Struggles
Gilead has been a major success story in terms of its stock and successfully developing treatments. It's had two blockbusters with Truvada, its HIV drug, and Harvoni, a drug for Hepatitis C. Consequently, Gilead's stock is up 400% over the last decade.
However, it's down 40% since peaking in early 2015. The major factor is that it hasn't been successful in developing new, effective treatments to replace these drugs especially as generics take more market share.
One recent success has been its antiviral drug, remdesivir, which has proven effective in treating coronavirus patients. The drug hasn't been formally approved for COVID-19 but received emergency approval and has been shown to speed up recovery times for afflicted patients. Currently, the drug is administered intravenously but Gilead is working on an inhalable version of remdesivir.
Remdesivir is expected to contribute around $3 billion to its current quarter in additional revenue, however this figure will probably drop as other treatments are approved. Additionally, due to the coronavirus, there's been a drop in healthcare spending across the board which has also negatively impacted Gilead, as patients and doctors have delayed visits.
In its last quarter, Gilead's sales declined by 10% to $22 billion. They actually peaked in the first quarter of 2016 at $32 billion. From a valuation standpoint, the stock is attractive with a 4.1% dividend yield and a forward price to earnings ratio of 9.3. It also has $20 billion in cash.
Whether the stock can regain its positive momentum depends on its ability to develop new, blockbuster drugs to replace previous ones which will continue lose sales as generics take a larger market share.
