Sciences of Gilead‘ (BROWN) first-in-class cancer drug and GILD stock is finally catching up.
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The biotech company is an expert in a means of fighting cancer by reprogramming a patient’s own cells with drugs called chimeric antigen receptor T-cell therapies, or CAR-T for short. But manufacturing custom drugs remains a challenge. For years, sales growth missed expectations almost as much as exceeded them, until 2022.
During the September quarter, sales of Gilead’s first drug in its class, Yescarta, soared 81% to $317 million. That helped Gilead’s general oncology business soar 79% year-over-year.
William Grossman, Gilead’s senior vice president of oncology clinical development, says it’s a new day at Gilead. He credits the fact that cancer became a focus area for Gilead to the new CEO, Daniel O’Day.
To put that in perspective, Yescarta generated $96 million in sales during the first quarter of 2019 when O’Day took the reins at Gilead. Sales increased year on year, but below expectations. This year, sales growth accelerated every quarter and easily exceeded projections. GILD shares have followed the stratospheric pattern. Shares have shot up 21% since the third quarter report, as of November 22.
“We’re not a one-hit wonder,” Grossman told Investor’s Business Daily. “We are here to stay (and) we are here to become an industry leader in the oncology space.”
GILD Stock: Adjustments and Beginnings in Cancer
To understand the quarterly success, it’s important to look back at Gilead’s early efforts in cancer.
Gilead acquired Yescarta’s maker, Kite Pharma, in 2017. Shortly thereafter, the Food and Drug Administration approved Yescarta for patients with a late-stage form of blood cancer. The agency later licensed a similar CAR-T drug from Novartis (NVS) named Kymriah.
But Yescarta sales lagged as insurers debated whether to reimburse 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.
This year, however, seems to be a turning point. Sales have accelerated remarkably, growing 32% in the first quarter, 66% in the second and 81% in the third. They beat the forecasts of GILD stock analysts every time. And that’s not the only feather in Gilead’s cap. Sales of the follow-up drug CAR-T Tecartus have exceeded forecasts for the past four quarters. In the third quarter, Tecartus sales soared 72%.
That helped fuel a breakout in GILD stock. Stocks broke out of a saucer base with a point of purchase to 74.22 on high volume on October 28, according to IBD MarketSmith letters Almost immediately, they sailed above the 5% chase zone.
Gilead also sells 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 fast-growing disease that does not respond to most traditional treatments. It can also treat a form of bladder cancer.
Trodelvy’s sales also skyrocketed in the third quarter, reaching $180 million by 78%.
Grossman calls Trodelvy a “cornerstone” of Gilead’s oncology pipeline. Of nearly 60 ongoing studies from Gilead’s oncology efforts, more than half use Trodelvy as a component. Many of them are phase 3 studies, which means that Trodelvy could get new uses in the near future.
Oncology, the next growth story
Since the beginning of 2019, Gilead has tripled its pipeline to 20 potential cancer treatments, Grossman says. BofA Securities analyst Geoff Meacham says the Gilead cancer pipeline is something to watch out for.
“In our view, the key to Gilead’s growth story remains the expansion of its oncology channel and further acceleration from Yescarta and Trodelvy, both of which impressed in the third quarter,” it said in a recent report.
However, he maintained his neutral rating on GILD shares, noting that “the oncology pieces are there, but it will take time.” But he raised his price target from 75 to 85.
Further expansion of Yescarta means making the drug available to patients at earlier stages.
Yescarta was previously approved for patients with large B-cell lymphoma and follicular lymphoma who worsened after two prior treatments. But this year, US officials said that patients with large B-cell lymphoma could use Yescarta after just one failed treatment. European regulators now allow Yescarta as a second treatment option for patients with two forms of lymphoma.
That second treatment option for some patients “really has the potential to change the standard of care that those patients were receiving,” said Gilead’s Grossman. “We’re seeing incredible response rates, incredible durability, and really shaking up the paradigm in how patients are treated.”
Trodelvy helps boost GILD shares
Gilead is also focused on expanding Trodelvy. Merck (MRK) is leading a study combining his blockbuster drug Keytruda and Trodelvy in non-small cell lung cancer. In addition, the FDA is reviewing Gilead’s application for Trodelvy in another form for breast cancer patients. The possible approval date is in February.
The latter “represents a large and difficult-to-treat population and should accelerate revenue growth significantly by mid-2023,” Michael Okunewitch, an analyst at Maxim Group, said in a report. It has a Buy rating on GILD shares.
In that same population of breast cancer patients, RBC Capital Markets analyst Brian Abrahams sees a more than $1.2 billion opportunity for Trodelvy. In addition to the combination with Merck, Gilead is testing Trodelvy only as a second and third option for patients with non-small cell lung cancer. The potential of these programs “is not reflected in the valuation at all,” he said.
He is top rated on GILD stock and recently raised his price target from 79 to 82.
Beyond Trodelvy, analysts are eyeing Gilead’s partnership efforts. The company has more than 40 active partners in oncology, says Gilead’s Grossman. One key is magrolimab with MacroGenics (MGNX) in blood cancers known as myelodysplastic syndromes.
Gilead is working with Arcus Biosciences (sucr) on a drug called dovanalimab in patients with non-small cell lung cancer. Domvanalimab aims to block TIGIT, a protein that helps tumor cells avoid detection by the immune system. Interim results later this year could further fuel GILD stock.
Highly Rated GILD Stocks
There is a lot of interest in Gilead’s oncology assets, says Grossman, the Gilead executive. At first, investors knew Gilead best for its hepatitis C business. HIV drugs then took center stage. Now, oncology is shining brightly.
Much of that is reflected in the performance of GILD stock, which is trending higher. Relative Strength Ranking out of 96. This puts the stocks in the top 4% of all stocks in terms of 12-month performance, according to digital IBD.
Grossman says it took time for the company to establish its presence in the segment. And it is still early.
“People look at assets like Trodelvy where we’ve been seeking multiple approvals early on with very positive clinical data, there’s talk of the CAR-T space with Kite becoming an industry leader there and our portfolio, I’m very excited about our pipeline “, said. “Watch out for space.”
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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