Gilead Sciences, Inc.

GILD Details

Gilead Sciences, Inc. (NASDAQ: GILD) is a research-based biopharmaceutical company. Its portfolio of products and pipeline of investigational drugs includes treatments for Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS), liver diseases, cancer, inflammatory and respiratory diseases, and cardiovascular ailments. As of July 27, 2021, the company’s market capitalization stood at USD 86.22 billion.

Divesting Non-Core Platforms: On July 19, 2021, GILD’s subsidiary Kite Pharma, Inc. agreed to sell its neoantigen TCR cell therapy R&D platform and clinical manufacturing facility in Gaithersburg, MD to BioNTech SE. The disinvestment will enable Kite to focus on expediting the development of Current CAR T-Cell therapies and improving the potential for cell therapy.

Step Towards Leadership In HIV-1 Treatment: On June 28, 2021, GILD announced that it has submitted a New Drug Application (NDA) to the U.S. Food & Drug Administration (FDA) for Lenacapavir, a crucial breakthrough innovation that has the potential to improve the lives of multi-drug resistant HIV patients with very few treatment options.

Strategic Collab for Advancing Cell Therapy: On June 17, 2021, Kite announced a strategic partnership with Shoreline Biosciences, Inc., a biotechnology company, to develop novel cell therapies for treating a wide range of hematologic malignancies. The partnership aims to combine Shoreline’s expertise in pluripotent stem cells (iPSC) differentiation and genetic reprogramming with Kite’s experience in cell therapy development, commercialization, and manufacturing expertise.

Q1FY21 Results: The company reported a 15.77% growth in net revenue to USD 6.42 billion in Q1FY21 (ended March 31, 2021) compared to USD 5.55 billion in Q1FY20, primarily due to Veklury (remdesivir) sales. Net income for the company expanded by USD 178.0 million to USD 1.73 billion in Q1FY21 vs. USD 1.55 billion in Q1FY20. As of March 31, 2021, the company had cash & cash equivalents (Including short-term investments) of USD 5.67 billion and total debt of USD 30.17 billion.

Key Risks: In FY20, HIV products contributed 70% of GILD’s total revenue. Any decline in demand due to competitive products or changes in the treatment paradigm of HIV could hurt the company’s financials. In addition, it operates in a highly competitive industry, and any advanced innovation or superior product development by its competitors could impact its operations. Furthermore, the biopharmaceutical industry is highly regulated and the company is subject to strict regulatory norms, both within and outside the U.S., non-observance of which could lead to delay, recall, or even suspension of approvals.

Outlook: In FY21, GILD expects its product sales to range between USD 23.7 - 25.1 billion, including Veklury sales to the tune of USD 2 - 3 billion. It also expects its GAAP EPS to range between USD 4.75 - 5.45, along with a non-GAAP EPS of USD 6.75 - 7.45.

Valuation Methodology:  Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

GILD Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: GILD stock price has increased 1.55% past one month and is currently leaning towards the higher band of the 52-week range of USD 56.56 to USD 75.04. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 56.14. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 74.78. Considering the slight uptick in the stock price, decent fundamentals, positive outlook, and associated risks, we recommend a “Hold” rating on the stock at the closing price of USD 68.93, up 0.26% as of July 27, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV. 

Hologic, Inc.

HOLX Details

Hologic, Inc. (NASDAQ: HOLX) is a developer, manufacturer, and supplier of diagnostics products, medical imaging systems, and surgical products, primarily focused on early detection and treatment of women’s health and well-being. Its operating segments are 1) Diagnostics, which includes Aptima family of assays and assays for HIV, Hepatitis B, and Hepatitis C Virus, 2) Breast Health segment, which includes breast imaging and breast biopsy guidance systems, 3) GYN Surgical, providing NovaSure Endometrial Ablation System and MyoSure Hysteroscopic Tissue Removal System, and 4) Skeletal Health, offering discovery and horizon X-ray bone densitometers and mini C-arm imaging systems. In Q2FY21 (ended March 27, 2021), U.S. accounted for 69.2% of HOLX’s total revenue. As of July 27, 2021, the company’s market capitalization stood at USD 18.33 billion.

Easing COVID-19 Detection On July 14, 2021, HOLX received a CE Mark for its Aptima SARS-CoV-2 assay in Europe, to be used for detecting COVID-19 through saliva samples. HOLX enhanced its production facilities to manufacture Aptima tests in large quantities and has already shipped over 100 million Aptima COVID-19 tests around the world.

Acquisition Pipeline: On June 17, 2021, HOLX completed the acquisition of Mobidiag Oy, manufacturer of molecular diagnostic solutions, for an enterprise value of ~USD 808.0 million. This acquisition diversifies HOLX's Diagnostics segment and follows the earlier acquisitions of Biotheranostics, Inc., Diagenode SA, Somatex Medical Technologies GmbH and NXC Imaging completed in FY21 (ending September 30, 2021).

Q2FY21 Results: The company reported a surge of 103.36% in net revenue to USD 1.54 billion in Q2FY21 vs. USD 756.1 million in Q2FY20. The Product line of business, which represented 89.7% of the total revenue in Q2FY21, increased 121.1% YoY driven by a two-fold increase in the Diagnostics segment due to sales of two COVID-19 assays. HOLX reported an upside of 409.46% YoY in its operating income to USD 796.8 million in Q2FY21, with a 3,110 bps improvement in the operating margin. Net income soared 543.72% YoY in Q2FY21 to USD 619.9 million.

Key Risks: HOLX is dependent on a single third-party manufacturer for its key Diagnostics instruments. Also, it relies on a limited number of suppliers for its key components or subassembly needs. Any discord with these third parties could adversely impact its operations. In addition, HOLX's top two customers accounted for 12.5% and 10.9% of its Diagnostic segment revenues in FY20. The loss of any of these key customers could hurt the company’s financials.

Outlook: In Q3FY21, HOLX expects to generate revenue in the range of USD 1.0 - 1.07 billion with a YoY growth of 21.5% - 30%. It also expects its GAAP EPS to range between USD 0.74 - 0.89 (up 39.6% - 67.9% YoY), along with non-GAAP EPS of USD 1.00 - 1.15 (up 33.3% - 53.3% YoY).

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

HOLX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: HOLX’s stock price fell 0.91% and 3.13% in the past 3 and 6 months, respectively, and is currently leaning towards the higher band of the 52-week range of USD 56.81 to USD 85.0. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 67.88. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 77.76. Considering the correction in the stock price, decent fundamentals, positive outlook, and associated risks, we recommend a “Hold” rating on the stock at the closing price of USD 72.19, up 0.92% as of July 27, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV. 

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