Gilead Stock Drops as Remdesivir Sales Go Through the Roof and Management Promises Stock Buybacks

Disclaimer: This post does not constitute financial advice. Author has a long position in Gilead. Do your own due diligence before making an investment.

It’s a bit of a strange headline, but here we are. Gilead was trading as high as $64.50 during the premarket on Monday January 11th, 2020. By close it had fallen to about $62.50.

I’ve been following Gilead for a while, but Monday might be the strangest day I’ve seen yet.

First, there was a bizarre pre-market press release, announcing updated guidance for Q4, 2020.

Companies don’t normally update guidance on quarters that are over. After all, what’s the point? These results will be financialized and made public in less than three weeks when Gilead reports their official year-end results.

I had to do some digging to find other companies that have done this. It’s rare to see it. It’s usually just retailers with wildly fluctuating Christmas sales that will revise guidance for a period that has ended.

Gilead updating their Q4 numbers due to high remdesivir sales seems like legal cover. In their Q3 conference call, remdesivir sales were guided down for Q4 (which most people thought was ridiculous given the pace of the pandemic.)

So, that was Monday pre-market. As soon as the market opened, the stock spiked, then fell off. This is a familiar pattern. Manipulators have been doing this for months. Probably years.

Here’s a one-day chart. Note the steep falloff around 10AM (this is very familiar price action.)

@YahooFinance

For the rest of the day the stock treaded water until 3:40 when CEO Daniel O’Day began his JPM2021 presentation.

As soon as the presentation began, manipulators shorted the stock . Since there’s no way they could have analyzed it properly in a millisecond, it’s obvious they were planning to short it no matter what was in the presentation. (It could be the run-up from $56 was done just so they could smash it again on good news. This makes retail investors frustrated, and more likely to dump their positions.)

Monday, Gilead went from +1.81% to -0.84%. This “green to red move” was sure to trigger more selling and scare people off.

Here’s a link to Gilead’s JPM2021 presentation: (http://investors.gilead.com/events/event-details/gilead-sciences-39th-annual-jp-morgan-healthcare-conference)

1 in 2 patients admitted to a hospital with Covid-19 is receiving remdesivir. Remdesivir revenue in 2021 could be huge. They did 2.4B in 2020 Q4. Cases and hospitalizations are only going up.

Speaking of going up…One of the false rumors that bears like to spread is that Gilead’s HIV sales are going down.

But they aren’t. Biktarvy is doing better than ever.

I encourage you to read through the entire presentation.

This slide is particularly interesting:

In the first Market Thoughts, I outlined three reasons for Gilead’s mysterious 11% run from December 31st to January 8th. One of those was buybacks. It seems like maybe they could have started already.

Tuesday the stock dropped again. Which is pretty weird given that management has promised stock buybacks.

On January 11th, Bristol Myers Squibb announced they would be doing 2 billion in buybacks. Since then the stock has jumped about 5%. $BMY has a market cap of 148 billion. 2 billion represents less than 1.5% of its market cap.

But investors like to see buybacks, so the stock is up.

Not Gilead though, they announced stock buybacks and the stock dropped.

Truly bizarre.

If Gilead did 2B in buybacks, that would represent about 2.6% of the company. If it moved the same way $BMY did, then you could expect it to go up more than 8%. Instead, it dropped 1%.

I also thought it strange that Gilead was willing to provide updated guidance to Q4, but opted to pass on guidance for 2021. They said they would do that in their full results to be released in February. (Around the 4th probably.) JPM2021 was the perfect time to shape investor expectations for 2021. But they didn’t.

Why not?

Meanwhile on Monday…Roche went up 3%.

One of the factors I’ve spoken about in the past that might indicate a buyout from Roche is coming, is the widening gap in market caps between Roche and Gilead.

Gilead’s six-day tear from $56 to $62 added less to their market cap than Roche’s Monday move.

If Roche goes up 3%, they add 10B to their market cap. This makes it easier for them to print shares and gobble up Gilead. All they realistically need is 120B for a full buyout, or 60B for 49.99%.

In the last five years, Roche is up 32%, while Gilead is down 36%. This creates a spread of more than 130B.

Gilead management said in the JPM conference call that their 2021 deals won’t be as large. They’re going to focus on paying down debt and rebuying shares. (Thus making the company more valuable since dividend and debt costs will both be lower.)

Management seems to be telegraphing that they’ve bought up all the assets they want (or can afford) and are comfortable waiting to see how the pipeline plays out. (Or maybe standing by to be absorbed into the Roche mothership.)

Gilead has a PE ratio about 9.

Gilead’s competitors have a PE ratio of closer to 18.

It’s clear that Gilead’s stock is insanely undervalued. Management also said they would be increasing the dividend this year, making their 4.35% yield even better.

Someone is keeping Gilead’s stock pinned down for nefarious reasons. Possibly a merger. Gilead’s intrinsic value (just based on revenue) is closer to $90. If Gilead was afforded the same growth premium their peers were, the stock would be $120.

If manipulators can keep Gilead’s stock price low enough for long, then investors will remain frustrated, and will readily accept any buyout offer that comes their way.

I’m sure you’ve seen posts like:

“I’d take $90 at this point just to be rid of it!”

“I’m stuck at 75!”

“Bagholding since 70, CEO plz sell the company!”

Let me be clear: A merger at anything less than $100 would be with ghost premium.

If they crush a stock from fair value down to half value, and then buy it out for fair value, they haven’t paid a premium. They’ve just stolen money from investors.

Gilead’s stock price cannot stay at these levels forever. It will either recover to its fair/intrinsic value, or Gilead will be bought out. A company generating 24B/year with a fat pipeline is worth a lot more than 77B.

If, like me, you’re upset about the manipulation of Gilead’s stock price you should report it to the SEC: https://www.sec.gov/tcr