Jefferies biotech analyst Michael Yee joins Market Domination to lay out his bull case on Gilead (GILD) and how investors should consider their biotech positions relative to the GLP-1 weight-loss craze.
Yee notes that while Gilead’s stock has not moved much over the last few years, it will likely take off as it moves forward with its new HIV prevention drug. “They have announced this week a second positive Phase 3 study for a new HIV prevention drug… And with a twice-a-year injection — one jab every six months — you can prevent HIV and show people who are on PrEP, which is daily pills for the prevention of HIV, fully approved in America… high-risk individuals can now convert to a very simple, easy to administer drug with 100% prevention of HIV,” he explains.
He notes that this drug could generate a multi-billion total addressable market (TAM) and grow revenues by billions of dollars. “So we’re taking a very cheap stock, very down and out, very low expectations, no pipeline, and now they have a new layer to that,” Yee adds.
While GLP-1 weight-loss drugs have spurred the growth of the biotech and pharmaceutical sectors, Yee believes that “we are in the fifth inning of a nine-inning game.” He says, “Obviously, we had the early move maybe two and a half years ago on Novo (NVO)… And now we have cycle three, which is you have about 27 other companies that are in this game. So I think everybody kind of knows and has heard about GLP-1.”
He adds that there are still good GLP-1 plays like Amgen (AMGN), as it moves forward in its trials for a monthly injection. He adds, “We still believe that certainly Lilly (LLY) is in leadership position. We think there’s room for others in a huge market. But you probably have to be more selective.”
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This post was written by Melanie Riehl
Video Transcript
Gilead, which also had some data this week.
Um, had HIV data had obesity data.
How should folks be thinking about Gilead?
This is the opposite.
So here we raised the price target a week and a half ago.
We’re at $95.
We’re extremely excited about what’s going on on Gilead because this is a stock where over the last few years hasn’t done anything.
Pull up the chart hasn’t done anything.
It’s depressing.
You might even remember this as the Hep C company.
And so over the last few years they’ve been doing well on HIV.
They made a couple of acquisitions.
They haven’t been so good.
The stock has been basically bouncing around, and it’s been a bit of a forgotten challenge, certainly relative to obesity names like Lily and Novo and even a gem, which my head on.
And so the reason why we’re excited about Gilead and when we think the stock is going higher is because they have announced, uh, this week and uh, a second positive Phase three study for a new HIV prevention drug called Cap and with a twice a year injection, one jab every six months, you can prevent HIV.
And so people who are on Prep, which is daily pills for the prevention of HIV fully approved in America, does about $2 billion a year.
And high risk individuals can now convert to a very simple, easy to administer drug with 100% prevention of HIV.
That’s great.
It could be multibillion TAM that’s gonna take a very sleepy story could grow revenues by a couple billion dollars.
That’s nice on a stock that’s down and out.
The second reason is because they do have treatment of HIV.
They’re gonna take treatment of daily pills and now convert it to once every two, once a twice a year injection.
That could be $10 billion.
So we’re taking a very cheap stock, very down and now very low expectation to pipe.
And now they have a new layer to that.
They should talk about this at an analyst event first analyst event.
I think in five years for Gilead.
So I think, you know, people are catching on this.
You mentioned obesity.
They do have a AG LP, one oral that has now started Phase one.
Let’s watch that.
That’s certainly not an evaluation either, so um a lot of very, uh, low expectations on the pipeline, but yet some positive things coming up.
So this is why you want to look at stocks are down and out.
Positive things going on here.
You mentioned GOP ones.
I gotta ask, Ma, that trend is hot as ever in your opinion.
And what What are you telling clients need to be the smart ways to play it.
Look, I think that, uh, we are in the fifth inning, uh, of a nine inning game.
Obviously, we had the early, uh, move maybe 2.5 years ago on Novo.
Last year, we had the Novo Select Outcomes data.
Obviously, Lily, I think has doubled since then.
And now we have cycle three, which is you have about 27 other companies that are in this game.
So I think everybody kind of knows and has heard about G LP one.
that doesn’t mean that there’s still select stories like Agen, which trades at a 1516 multiple.
If they really do have positive data at the end of this year and go to phase three like we think we they will with a monthly injection not a weekly that can play in it.
There’s smaller companies with oral G, LP ones or others that can play.
And certainly we do believe that pharma is still gonna do some consolidation.
M and A And there’s still pockets of areas there.
So we we still believe that Lily is in leadership position.
We think there’s room for others in a huge market, but you probably have to be more selective.
And it’s not just like everybody just goes up.
Michael, come visit us more often.
There’s no way to have you in the studio really appreciate it.
Thank you.