Gilead Sciences (GILD) – High Growth With No Investor Conviction

If you are looking for high growth stocks, Gilead Sciences might be one you should take a look at. They just reported earnings that blew by estimates and yet investors aren’t rallying to buy the stock. For such a big beat, you would think the stock would be soaring so there must be something going on.

Sovaldi is GILD’s Hepatitis C drug that reportedly cures 90% of the people who take it. The problem is, the pills cost $1000 each and you need about 84 of them for the full series. Gilead is making a lot of money right now but as you can imagine, there is a fair amount of outcry from many different directions about the seemingly outrageous price of the drug.

That is the biggest reason investors seem to be a bit hesitant about bidding the stock up: fear that pressure from regulators, Congress, or some other source will force Gilead to lower the price of the pills. Also, Sovaldi is not without competition coming its way in the coming months and years.

While Gilead does have other drugs in the pipeline, Sovaldi is the overwhelmingly the main earner right now. That weighs heavily on investor’s mind as they would like the company to have a more diversified portfolio of drugs. But rarely do you find a drug that is reportedly as effective in curing a condition as Sovaldi is. Hepatitis C is a very serious condition that is life threatening and even more expensive to treat in other ways. That, Gilead claims, actually makes the $1000 per pill for a 90% chance of being cured a fair price to pay. 

GILD has the growth investors want and may be a good risk to take. After all, they are making money hand over fist and if they are able to keep Sovaldi’s price tag at $1000 per pill, future profits could be considerable. If that happens, the price of the stock today could be considerably lower than what we will see after the next few earnings releases.