Assessing Gilead's Prospects In HIV/AIDS, With Comments On HCV As Well

Summary

GILD has begun talking a bit more about its pipeline and product plans for its leading antiviral programs.
This has allowed analysts to have greater clarity about its future.
Based on recent comments from its EVP and CSO and from GILD's recent product launches, it's possible to now assess its HIV/AIDS strategy for the 2020s.
This article attempts to analyze that strategy, finds it potentially a winning one, and then guesstimates future cash flows from it.
The article concludes by looking at GILD as a value and growth stock that suggests it is relatively attractive for patient investors oriented to assuming a degree of risk.

Background

As I mentioned in my recent article on Gilead (NASDAQ:GILD), on the global potential for its HCV drugs to, over time, beat the evolving bearish consensus, I've had the time and interest to update my understanding of its pipeline. This has been helped by various comments, press releases, etc. by the company in recent weeks.

This article begins to follow through in exploring GILD's pipeline. Because in the DoctoRx view of investing in common stocks, the point of it all is to share in profits that are either retained in the company or distributed to shareholders, rather than endless promising future profits without generating any, or any significant, current profits; the most important and impressive part of GILD is its HCV and HIV/AIDS product lines. It has developed and extended them in almost unprecedented fashion; doing so while maximizing profits and keeping the company's growth manageable have of necessity kept the rest of its pipeline small relative to its now-large size. This in turn has appropriately kept the P/E at a discount to that of the market; the question for me is whether the degree of that discount is too large. The S&P 500 (NYSEARCA:SPY) is trading above 24X TTM EPS; GILD is trading a little above 7X.

My experience with high-quality names such as this is that on some meaningful time frame, often a long one though, the holder of the 7X P/E name will do well. So, I'm biased before looking more deeply to think that GILD is a strong buy-and-hold investment in a pricey market for both stocks and fixed income.