GILD and BMY offer refuge in a turbulent market

After another bad market week, the average US stock is now trading in bear market territory. Of course, this was also the case in 2020, 2018 and 2016 and many other periods in the history of the market. Such are the difficulties that must be endured to achieve significant long-term returns on equities.

While I think a lot of long-term buying opportunities are being created for stocks in the financial, industrial and IT sectors just to name a few, I suspect many investors may be looking to the more recession-resistant healthcare sector these days for new ideas.

I think the names in the pharmaceutical industry are interesting as they offer generous dividend yields and very reasonable stock market valuations.


A single digit P / E ratio company that I like is Gilead Sciences

(GILD), which recently announced that it has entered into agreements with five generic manufacturers to resolve the litigation and patent challenges associated with certain Gilead therapies containing TAF-based HIV pre-exposure prophylaxis (PrEP) products, including Descovy, Vemlidy and Odefsey.

The deal was similar to another in 2014 for PrEP’s then workhorse Truvada and pushes the generic threat no earlier than Halloween 2031 and gives GILD some breathing room to develop a long-lasting injection. action: widely considered the next step for the company’s HIV franchise.

The news should also reassure income-oriented investors that Gilead’s cash cow has many more years to live, perpetuating what has been a very solid cash flow generation and supporting a 4.7% dividend yield. .

But the biggest wild card (with arguably the biggest upside) remains the future of Gilead’s cancer portfolio, with over $ 40 billion in purchases over the past 5 years slow to bear fruit. However, strong results from Yescarta and Trodelvy (from the acquisitions of Kite Pharma in 2017 and Immunomedics in 2020, respectively) remain promising with the first drug expected to exceed $ 1 billion in sales this year and the second hitting the mark by 2024. .

Another company with a good dividend yield is Bristol Myers Squibb

. The shares have outperformed since the start of the year, but continue to trade less than 9 times the 2023 consensus analyst’s EPS forecast.

Bristol has a legacy of supporting its pipeline by engaging partners to share development costs and diversify the risks of clinical and regulatory failure, and the acquisition of Celgene has moved the company further into the specialty pharmaceutical segment.

The benefit of this strategy was evident when conflicting results were released earlier this month from a phase 2 study that threw a blanket on an experimental anticoagulant that many hoped could prevent secondary strokes. The first drug in the category, milvexian, was developed in collaboration with Johnson & Johnson’s
Janssen unit. Promising data emerged from a 2021 study to reduce blood clots for patients undergoing elective total knee replacement surgery without increasing the risk of bleeding. Having failed to meet the endpoint in the recent phase 2 study, the future of the drug is now under discussion.

On the other hand, BMY partnered with Pfizer in 2007 to develop the leading blood thinner Eliquis, which generates over $ 10 billion in annualized revenue for Bristol alone.

On the bright side of the recent news registry, BMY received FDA approval of the respective cancer and heart failure drugs Opdualag and Camzyos last April, to accompany new approvals in March for the current drug Opdivo. These are solid advances not only to offset the losses of the multiple myeloma drug Revlimid, which lost patent protection starting this year, but to continue growing at the top line.

And it announced last Monday that the FDA had approved its drug Sotyktu (deucravacitinib) for the treatment of moderate to severe plaque psoriasis, while Street analysts were quick to note the lack of a black box warning, which it’s notable given the safety concerns that have plagued other autoimmune drugs.

Bristol has a large pipeline of potential products with more than 50 compounds under development in more than 40 pathological areas and investors should appreciate the 3.1% dividend yield and economic price of the stock as they wait for new hits to emerge.


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