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Great Prospects For Gilead Sciences

Gilead Sciences, Inc. (NASDAQ:GILD) is a difficult company to write about. It is so widely followed and commented upon, it is very hard to offer new insight. That being said, I will add to this conversation my own opinions on the subject.

The chatter surrounding GILD is all over the place. It ranges from GILD having unlimited potential to facing imminent demise from the competition. The truth is somewhere in between.

Company Summary

Gilead, a biopharmaceutical company, focuses on the discovery, development and commercialization of drugs for several indications including human immunodeficiency virus (HIV), liver diseases such as chronic hepatitis C virus (HCV) infection and chronic hepatitis B virus (HBV) infection, oncology and inflammation, and serious cardiovascular and respiratory conditions.

The Company has a market capitalization of about $146.0 billion and a trailing 12-month EPS of $9.53. It employs about 7,000 people. Gilead pays a dividend of $1.72, which generates a current yield of 1.7%.

Gilead's most significant revenue drivers are HCV drugs Sovaldi (Dec 2013) and Harvoni (Oct 2014). The Company's major focus is presently on liver-related diseases. It derives about 65% of its revenues from this segment with another 30% coming from HIV-related drugs. The remaining 5% is spread among oncology, cardiovascular and respiratory drugs.

Some question Gilead's ability to maintain market dominance in the HCV segment as competitors introduce alternative treatments. Competition is a threat to every company and Gilead is not immune. However, the threats are, in my opinion, overblown. Even if a competing drug was approved today by the Federal Drug Administration, there would be no immediate effect on Gilead revenues.

Getting a drug approved is one thing and getting it widely accepted in the market is another. The new drug faces the hurdle of being accepted to government and insurance company formularies by proving it is a viable alternative to existing approved drugs on the basis of efficacy, safety and price. Even after being placed on the formulary list, the drug needs to be marketed to doctors and patients who are generally loathe to make changes. All this can and is done but it takes time.

GILD has a rich pipeline of its own and has been successful in introducing new drugs. It also has a history of licensing promising drugs from development companies and of making outright acquisitions. I do not know Gilead's strategy for going forward. They may decide to further expand their dominance in the liver disease market or they may want to diversify their product line into oncology. GILD may like a company such as CASI Pharmaceuticals (NASDAQ:CASI). CASI is a tiny company developing orphan drugs. CASI announced that it had received an Orphan Drug Designation from the European Union for its liver cancer drug. The drug from the company, which treats hepatocellular carcinoma - liver cancer - is known as ENMD-2076.

The Financial Statements

In FY14. GILD reported...