[Click eStock] "Gilead Sciences, Valuation Pressure Rises on Remdesivir Expectations... Sufficient Investment Appeal"

[Asia Economy Reporter Eunmo Koo] Gilead Sciences (GILD), a pharmaceutical company based in California, USA, recorded results in the first quarter of this year that exceeded market expectations. Although the valuation pressure increased as Remdesivir attracted attention as a treatment for COVID-19, the investment appeal remains strong.

According to Hana Financial Investment on the 7th, Gilead Sciences posted sales of $5.5 billion in the first quarter of this year, a 5.1% increase compared to the same period last year, slightly surpassing market expectations by 2%. Adjusted operating profit was $2.8 billion, significantly exceeding market expectations. AIDS treatments, which account for 75% of sales, showed double-digit growth for eight consecutive quarters, and sales of hepatitis C treatments stabilized, declining by only 7% compared to the same period last year.

Although valuation pressure has increased, the investment appeal is still considered sufficient. Since the World Health Organization (WHO) mentioned Remdesivir as the most promising treatment, market interest in Gilead has surged, and the stock price has risen more than 20% this year. As a result, valuation pressure has also increased, with the 12-month forward price-to-earnings ratio (PER) rising from 9 times at the beginning of the year to about 13 times currently. Minjung Sun, a researcher at Hana Financial Investment, analyzed in a report on the same day, “Despite valuation pressure, Remdesivir is currently almost the only treatment for COVID-19, and the cash generated from Remdesivir can be used to find new growth engines, including mergers and acquisitions (M&A), so the investment appeal remains.”

Remdesivir received Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA) on the 1st after the release of SIMPLE clinical trial results for severe patients on the 29th of last month and clinical results led by the National Institute of Allergy and Infectious Diseases (NIAID). Since products with EUA can be sold in principle, market attention focused on the specific commercialization direction of Remdesivir.

Gilead stated that it remains committed to donating 1.5 million doses produced in May (enough to treat 140,000 patients with a 10-day regimen) free of charge, and nothing has been decided yet regarding future production, sales, and distribution. However, outsourcing is being considered to ensure smooth production, and the company plans to produce enough to treat more than 1 million patients this year. GlobalData estimated that annual sales of Remdesivir will reach $2 billion next year and $3 billion in 2022 and 2023. The development cost of Remdesivir is expected to reach $1 billion this year, mostly used to expand production facilities.

This content was produced with the assistance of AI translation services.