Gilead Sciences(GILD) First-in-class cancer drug and GILD stock are finally hitting their stride.
The biotech company is an expert in ways to fight cancer by reprogramming a patient’s own cells with drugs called chimeric antigen receptor T-cell therapies, or CAR-T for short. But making medicines to order remains a challenge. For years, sales growth has been missing forecasts as much as it has been beating it—until 2022.
During the September quarter, sales of Gilead’s first in the category, Yescarta, rose 81% to $317 million. This helped Gilead’s oncology business grow 79% year-over-year.
It’s a new day at Gilead, says William Grossman, vice president of clinical development, oncology at Gilead. To his credit, cancer has become Gilead’s focus for new CEO Daniel O’Day.
To put it in perspective, Yescarta generated $96 million in sales during the first quarter of 2019 when O’Day took the reins of Gilead. Sales rose year-over-year, but lagged expectations. This year, sales growth accelerated each quarter and easily exceeded expectations. GILD stock followed a stratospheric pattern. Shares are up 21% since the third quarter report, as of November 22nd.
“We’re not a one-hit wonder,” Grossman told Investor Business Daily. “We’re here to stay (and) we’re here to become the industry leader in oncology.”
GILD STOCK: Cancer fits and starts
To understand the quarter’s success, it’s important to look back at Gilead’s early cancer treatment efforts.
Yescarta’s manufacturer, Kite Pharma, was acquired by Gilead in 2017. Soon after, Yescarta was approved by the Food and Drug Administration for patients with a type of late-stage leukemia. The agency later signed on to a similar CAR-T drug Novartis (NVS) is called Kymriah.
But Yescarta’s sales have faltered as insurers debate whether to pay for the treatment and amid manufacturing challenges. Since the fourth quarter of 2018—the most recent period for which FactSet has data—Yescarta’s sales have exceeded expectations 56% of the time.
But this year seems to be a turning point. Sales accelerated significantly, growing 32% in the first quarter, 66% in the second and 81% in the third. They have outperformed GILD stock analysts’ predictions every time. And this isn’t the only feather in Gilead’s cap. Sales of the CAR-T supplement drug Tecartus have exceeded expectations over the past four quarters. In the third quarter, Tecartus sales were up 72%.
This helped fuel the breakout in GILD stock. Shares exited the bottom of the saucer with a buy point at 74.22 on high volume on Oct. 28, according to IBD Market Smith charts. Almost immediately, they sailed over the 5% chase zone.
Gilead is also selling Trodelvy, a treatment it bought in its 2020 acquisition of Immunomedics for $21 billion. Today, the drug is approved for patients with triple-negative breast cancer, a rapidly growing disease that does not respond to most conventional treatments. It can also treat a form of bladder cancer.
Trodelvy’s sales also rose in the third quarter, jumping 78% to $180 million.
Grossman describes Trodelvy as a “cornerstone” of Gilead’s oncology pipeline. Of the nearly 60 ongoing studies from Gilead’s oncology efforts, more than half use Trodelvy as an ingredient. Many of these are Phase 3 studies, which means Trodelvy could gain new uses in the near future.
Oncology, the next growth story
Since early 2019, Gilead has tripled its pipeline to 20 potential cancer treatments, Grossman says. Bank of America Securities analyst Jeff Meacham says Gilead’s cancer pipeline should be watched.
“In our view, the key to Gilead’s growth story remains the expansion of its oncology pipeline and the further acceleration of Yescarta and Trudelphi, both of which impressed in the third quarter,” he said in a recent report.
However, it maintained its Neutral rating on GILD stock, noting, “Oncology pieces are in place, but it will take time.” But he raised his price target to 85 from 75.
Further expansion of Yescarta means making the drug available to early-stage patients.
Yescarta was previously approved for patients with large B-cell lymphoma and follicular lymphoma who got worse after two previous treatments. But, this year, US officials said patients with anaplastic large B-cell lymphoma could use Yescarta after one failed treatment. European regulators now allow Yescarta as a second treatment option for patients with two forms of lymphoma.
The second treatment option for some patients “really has the potential to change the level of care that these patients have been receiving,” Grossman of Gilead said. “We’re seeing incredible response rates, incredible durability, and really shaking up the paradigm in how we treat patients.”
Trodelvy helps drive shares of GILD
Gilead is also focused on expanding Trodelvy. merck (MRK) is leading a study combining its blockbuster drug Keytruda with Trudelvy in non-small cell lung cancer. Furthermore, the FDA is reviewing Gilead’s application for Trodelvy in another form of breast cancer patients. Possible approval date in February.
The latter “represents a large, hard-to-treat population that should accelerate revenue growth significantly in mid-2023,” Maxim Group analyst Michael O’Conwich said in a report. It has a buy rating on the GILD stock.
In this same group of breast cancer patients, RBC Capital Markets analyst Brian Abrahams sees an opportunity of more than $1.2 billion for Trodelvy. In addition to the merger with Merck, Gilead is testing Trudelvy alone as a second and third option for patients with non-small cell lung cancer. The potential of these programs, he said, “is not reflected at all in the evaluation.”
It has an outperform rating of GILD stock and recently raised its price target to 82 from 79.
Away from Trodelvy, analysts are watching Gilead’s partnership efforts. Grossman of Gilead says the company has more than 40 active oncology partners. One key is magrolimab with macrogenics (MGNX) in blood cancers known as myelodysplastic syndromes.
Gilead works with Archos Biosciences (RCUS) on a drug called domvanalimab in patients with non-small cell lung cancer. Domvanalimab aims to block TIGIT, a protein that helps cancer cells avoid detection by the immune system. Interim results later this year could further fuel GILD stock.
Highly rated GILD stock
There’s a lot of interest in Gilead’s oncology origins, says Grossman, Gilead’s CEO. Early on, investors knew Illiad best for its hepatitis C business. Then HIV drugs took center stage. Right now, oncology is bright.
A lot of that shows up in the performance of GILD stock, which has a bullish relative strength rating of 96. That puts the stock in the top 4% of all stocks in terms of 12-month performance, according to IBD Digital.
Grossman says it took time for the company to establish itself in the sector. It’s still early days.
“People are looking at assets like Trodelvy where we’re going to get multiple approvals out of the gate with very positive clinical data, the CAR-T space is being talked about as Kite has become an industry leader there and our pipeline, I’m very excited about our pipeline.” “Watch out for space.”
Follow Allison Gatlin on Twitter at @employee.
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