Gilead Sciences, Inc. (NASDAQ:GILD) is a bio-pharmaceutical firm that produces anti-viral products. The firm’s main offerings are a cure for Hepatitis ‘C’ and a HIV treatment. They even have a few other medications with lower sales among various treatments.
The story of Gilead is a massive growth story since 2014 and dropping cash flows from 2015 onwards. In 2013, Gilead’s lead drug Sovaldi, was permitted by the FDA which later turned into a blockbuster. Sales quickly surged leading to total firm revenues of more than $32 billion in 2015. The problem now is as this medication was a treatment for Hepatitis C, sales have started dropping as the sick population is cured. It is encouraging for public health, but it turns it tough to assess Gilead as an investment.
Sovaldi along with other Hepatitis C drugs, shows a major cash cow for company going forward. The sales will continue to decline over time, however, they won’t be non-existent. The industry is pricing Gilead as if it’s Hepatitis C segment was worthless. Analysts anticipate it to make much more in revenue for several years to come.
Meanwhile, Gilead has a budding HIV business. Their medications are industry leading, and will signify the core of the company’s earnings in the upcoming period. This business has been mainly overlooked by investors who have focused heavily on the Hepatitis C drop. Sooner or later that will change.
In terms of dividend, the company started dividend payout two years earlier, and currently records a 2.6% yield. It is with a low payout ratio of 18%. The market can anticipate several years of further dividend boost as Gilead could choose to improve the payout ratio and disburse more payout without even growing earnings. The company’s management is extremely shareholder friendly. It has spent $10 billion in 1Q2016 in shares buy back process, and another $1 billion in each of the second and third quarters purchasing back more shares.