Gilead Sciences (GILD) recently announced a pipeline acquisition to further improve its layout in the inflammation field. The biotech company’s overall stock price performance this year has outperformed the broader market, with financial and pipeline progress jointly driving the upward trend.
Gilead Sciences disclosed on Thursday that it will pay $1.275 billion in cash upfront to acquire PepStar Therapeutics’ oral inflammation drug program, which includes an investigational therapy targeting intestinal diseases. Before this transaction was announced, the company’s oral experimental drug emvistegrast for chronic intestinal diseases had just disclosed positive interim data on Monday. HCXT-2001, as a newly added inflammatory bowel disease candidate drug, can be developed independently and can also be used in combination with the company’s other pipeline programs. HCXT-2001 targets the IL-23 receptor, which is an important component of the inflammatory immune pathway, and inflammatory bowel disease is a long-term chronic disease in which the immune system induces inflammation of the digestive tract. Citigroup analyst Geoffrey Meacham believes that HCXT-2001 is still in the early testing stage and has no public clinical data yet, making the size of this upfront payment very notable. The acquisition consolidates Gilead Sciences’ inflammation and immunology strategy, helps the company shed its single reliance on the core HIV business, and opens up long-term growth space. The transaction is expected to close in the fourth quarter of this year, and Gilead Sciences will obtain global development rights for the program.
Previously, declining sales of remdesivir caused performance fluctuations at one point, but the company’s second-quarter revenue reached $7.8 billion, up 10% year over year, and product sales excluding remdesivir also increased 10% year over year, with the loss in the period mainly coming from acquisition-related expenses. The HIV product line is the core of revenue, with quarterly sales of $5.7 billion, up 12% year over year. Favorable regulatory developments continue to materialize. In late August, the FDA approved the HIV oral tablet Bixlenvo, which is a combination of two existing drugs and facilitates simplified treatment for patients who take multiple pills daily, consolidating the company’s leading position in the HIV market. In oncology, the anticancer drug Trodelvy received approval for an indication expansion in June and can be used for first-line treatment of metastatic triple-negative breast cancer. Compared with later-line treatment, the first-line indication covers more newly diagnosed patients and has stronger commercial potential. The liver disease segment has also been supplemented. Hepcludex, approved in May, is used for chronic hepatitis D virus infection. Second-quarter revenue in the liver disease segment was $877 million, up 10% year over year, and management expects this new drug to bring moderate incremental growth to the segment.
As the impact of remdesivir gradually weakens, newly approved drugs and the indication expansion of Trodelvy are expected to drive revenue and earnings improvement in the medium term. Core HIV drugs such as Biktarvy and Descovy for pre-exposure prophylaxis remain stable pillars, and the company still has multiple clinical and regulatory milestones in HIV and oncology awaiting completion. In terms of dividends, Gilead Sciences’ forward dividend yield is 2.2%, higher than the S&P 500 average of 1.1%. Over the past decade, the dividend has increased by 74.5% cumulatively, offering dividend appeal to long-term investors.
Overall, Gilead Sciences is, on the one hand, filling out its inflammation pipeline through external acquisitions, and on the other hand, relying on continuous new drug approvals and indication expansions in HIV, oncology, and liver disease to strengthen its foundation. While shedding the drag of a single product, it has formed a differentiated advantage through a stable dividend, and its diversified layout continues to reduce concentration risk in its business structure.
