Gilead Sciences Inc. (GILD)

Healthcare sector has been a tough one to be in in the last 6-12 months. This is a fantastic company. Have a remarkable drug Solvaldi which cures hepatitis C. This got lumped in, to a degree, with other companies on drug pricing. Also, its pipeline is not as deep as some of the other pharmaceutical companies. The growth rate in the underlying business over the next couple of years will not be as fast. Generates a lot of free cash and has virtually no debt on their balance sheet. Prefers Allergan (AGN-N) which is growing double digit top line growth and trading at about 15X earnings.

All healthcare investors are hurting over the last few months, and this company is part of that. It makes 2 drugs that treat hepatitis, and they are particularly vulnerable to a law that has been proposed in the US. If you are a dual-eligible person, someone who is both Medicare and Medicaid, you are going to start paying the lower of the 2 prices for those drugs. If this happens, it will knock 14% off this company’s earnings. Wait for a cheaper opportunity.

We have a pretty decent uptrend and then a multiyear trading range. Compared to the big run up, the recent drop is not a concern. If it can break out above $120 then it is away to the races.

The earnings and forecast were certainly not spectacular, and the company took a big hit. It is now trading at about 7.5X earnings and has a net cash position. They also raised their dividend in the quarter. There is lots of talk about declining sales in their hepatitis C products, but this is not the only product. Thinks it will be okay in the long-term. Wouldn’t expect much in the next couple of quarters.

This makes him uncomfortable. He doesn’t like the concentration. They derive over 60% from their hepatitis C drugs, which have been very successful. There are a few issues. Very high cost at about $90,000 for a cure which is a 90-day script. A lot of people are after them to get the price down. There is also competition from other drugs. It is a cure, which is great from a social standpoint, but from a business standpoint do you want to invest in a company where the drug will no longer be needed.

(A Top Pick May 4/15. Down 14.26%.) A lot of the drop was in the last 2 days. They disappointed on earnings. Has a lot of cash generation. Big profits. At 8X earnings, you can afford to wait for the next blockbuster, and he is fairly convinced that they will have one soon.

This is one of the cheap stocks. A $130 billion market cap company that generates $20 billion of free cash flow every year. The stock has come off, mostly because of Hillary Clinton and other politicians going on about expensive drugs. They have a state-of-the-art drug that cures hepatitis C. 14% free cash flow yield. Dividend yield of 1.69%.

(Market Call Minute.) A diversified biotech name. She doesn’t play biotechs directly, but if you are going to have a holding here, this is probably the one.

It is a choppy looking chart. The trend down looks like it is breaking mid 2015 when we had a symmetrical triangle. The stock consolidated. The stock broke down and now we are moving to higher lows. It might target $110, but there is noise ahead of it. He would stay with the stock, but get out of it if it breaks down.

(Top Pick May 19/15, Down 9.71%) It is confirming to one of his EBV lines. $189 model price 94% upside. Let everything go quiet for a while. It is a HEP-B cure for $10k. It pays about a 2% dividend. It got caught up in the Valiant thing with Congress. It is tracking nicely at EBV +6.

This has his own issues outside of any healthcare reforms. It is the leading producer of hepatitis C medication. They sell for exorbitant amounts, about $1000 a day for a 90-day course. Because it is a cure, this is a shrinking market. About 60% of this company’s total revenues are made up of just this drug group, which is dangerous in itself because of competition.

Just less than 2% dividend. The play is that it is a conservative way to have exposure to the biotech space. 70% market share in the HIV market place. China is a catalyst with the government introducing more insurance programs. Share buy back on the go and a great history of dividend increases.

This is a company that can actually cure hepatitis B. The downside is that it is going to cost you $10,000. The regulators have been on this company, criticizing them for the price. His model price is $181, closed at $88.66, so has a 100% upside. Dividend yield of 1.96%.

Low PE, a decent dividend, great hepatitis C drug, and have been receiving approval for an HIV drug. With drug pricing coming into the political realm, you have to be very cautious. Also, there are headwinds from a valuation standpoint.

A very impressive company. Of all the biotech companies out there, this is one of the ones that has actually had some success in terms of bringing drugs to market that actually worked. The problem is that some of its drugs are enormously expensive. There is a tremendous negative focus on companies that have expensive drugs. Very expensive.