Gilead Sciences is a stock that has had a great run in 2014 and yet, is still priced very low compared to competitors. After topping out at $116.83 earlier this month it has gone straight down to where it is now, about $100 per share.
There are a few reasons why the stock has been under pressure as of late:
1) The first is pure profit taking as you could have picked up the stock for as little as $65.48 earlier in the year. It is understandable that some investors are happy with their gain and just want out.
2) The second reason is that investors are worried about the high price GILD charges for their two biggest hepatitis C drugs Sovaldi and Harvoni. At close to $100,000 per cure, investors are continually worried that the various world governments will try to knock those prices down. But since they are both proven cures (and not just management drugs), the high price ends up being cheaper for patients in the long run than trying to manage the disease. Nevertheless, it is still a worry that Congress will get involved as well as other “do good” groups and try to put pressure on Gilead to lower those prices.
3) The same kind of high price worries extend to health care insurance companies who are always trying to get things done with the cheapest price.
4) Finally, there is worry that competitors may be able to come into the mix with drugs that are comparable and much cheaper. The latest fear comes from AbbVie (ABBV) which has yet to price its new hepatitis C cocktail and is busy getting it approved in Europe.
While indications are that GILD’s two drugs work the best, investors are nervous and that has greatly contributed to the stocks’s volatility. The stock is cheap for that reason and can be picked up for a price way below most analysts targets in the $130 to $150 range. Gilled is making a ton of money and its forward guidance has never been lowered. This makes Gilead Sciences a Big Bet Stock as of 11/25/2014 at a price of $100.