“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, February 10, 2020

by Ian Harvey

IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

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Option Trade – Gilead Sciences, Inc. (NASDAQ:GILD) Calls

Tuesday, February 11, 2020

** OPTION TRADE: Buy the GILD MAY 15 2020 70.000 CALLS at approximately $3.80.

Place a high pre-determined sell at $7.60.

Include a protective stop loss of $1.55.

Research-based biopharmaceutical company, Gilead Sciences, Inc. (NASDAQ:GILD) the second biggest biotech company behind Amgen (AMGN) in terms of market valuation, could hold the key to containing and treating the coronavirus. Chinese officials think the company just might.

Chinese researchers reportedly have applied for a local patent on an experimental Gilead drug that they believe could help fight the novel coronavirus outbreak - and also significantly bolster Gilead's bottom-line going forward.

The Wuhan Institute of Virology – based in the central Chinese city at the epicenter of the epidemic – has applied for a patent in China for the use of Remdesivir, an antiviral therapy used to treat infectious diseases including Ebola and SARS.

The application was made on Jan. 21 along with a military academy, according to a Feb. 4 statement on the institute’s website.

Earlier this month, GILD stock rose 5% in a single day after the biotech company said it would send an experimental Ebola virus treatment to China to test it as a coronavirus treatment. The drug previously showed promise in a 35-year-old U.S. patient with a new form of coronavirus.

Also, Gilead is trying to stake its claim in HIV treatments. It's facing off against ViiV Healthcare, an outlet mostly owned by GlaxoSmithKline (GSK).

The biotech company also makes Yescarta, a key cancer drug it acquired alongside Kite Pharma.

Other Developments.....

In December, Gilead and Japan-based pharma Eisai entered into a collaboration agreement for the co-promotion of a drug called filgotinib as a rheumatoid arthritis treatment, pending approval. Further, Gilead announced it submitted an application for filgotinib approval to U.S. regulators.

The biotech company also announced China approved chronic hepatitis C treatment Vosevi.

Also in December, subsidiary Kite asked the FDA to approve its cancer treatment, dubbed KTX-X19, for patients with mantle cell lymphoma. Gilead bought Kite for $11.9 billion in 2017. Kite makes cancer treatments using a patient's own immune cells.

In November, Gilead said a pooled analysis showed strong results for filgotinib in rheumatoid arthritis treatment. Filgotinib is being developed with Galapagos (GLPG). The two companies announced a collaboration deal in August 2019.

Under terms of that deal, Gilead paid Galapagos $3.95 billion up front. Gilead also made a $1.1 billion equity investment in the other biotech company. The deal was initially announced July 14, 2019. Gilead will have access to six drugs in clinical studies and 20 preclinical medicines.

Gilead announced it would license a respiratory and herpes antiviral program from pharmaceutical giant Novartis (NVS). Novartis will receive an undisclosed upfront payment and up to an additional $291 million in potential milestone payments.

In April 2019, Gilead announced collaboration with privately held Insitro to investigate potential treatments for nonalcoholic steatohepatitis. Insitro uses machine learning to build models to understand diseases.

The company also collaborated with Kiniksa Pharmaceuticals, Ltd. KNSA to conduct a phase II, multicenter study of mavrilimumab, an investigational, fully-human monoclonal antibody that targets granulocyte macrophage colony stimulating factor receptor alpha, in combination with Yescarta in patients with relapsed or refractory large B-cell lymphoma.

Importantly, Gilead named a new chief executive in December 2018. Former Roche (RHHBY) executive Daniel O'Day took the helm at Gilead on March 1, replacing former Gilead CEO John Milligan.

Earnings…..

Last week Gilead Sciences reported mixed results for the fourth quarter of 2019 as earnings missed expectations while sales surpassed the same. However, the outlook for 2020 was weak.

The company delivered earnings of $1.30 per share in the fourth quarter, declining from $1.44 in the year-ago quarter and missing the Consensus Estimate of $1.68.

Total revenues of $5.88 billion beat the Consensus Estimate by 2.68% and grew 1.44% year over year.

Gilead expects sales of $21.8-$22.2 billion for 2020. Adjusted product gross margin is anticipated to be 86-87%. Adjusted earnings per share are expected between $6.05 and $6.45. Including stock-based compensation expenses, earnings for 2020 are expected to be $6.13.

Summary.....                

Gilead Sciences, Inc. has a twelve month low of $60.89 and a twelve month high of $71.19. The company has a debt-to-equity ratio of 1.11, a quick ratio of 3.01 and a current ratio of 3.23. The stock has a market capitalization of $87.28 billion, a P/E ratio of 16.39, a PEG ratio of 4.91 and a beta of 1.21. The company has a 50 day simple moving average of $65.04 and a 200 day simple moving average of $64.93.