Today I want to reintroduce you to a biotech stock that Wall Street has been pricing as though it were dead money.
This biotech company recently filed a stellar earnings report. But those earnings were slightly off analyst expectations, and the share price dipped – making this is yet another stock that sells off after a slight miss, a dispiriting trend.
But that's okay. Wall Street's ignorance gives us an entry point the likes of which we probably won't see again for years.
I'm going to show you how Wall Street got it wrong – and why today's recommendation is actually a huge profit opportunity. And we're going to pick this biotech stock up using a strategy perfect for current market conditions.
Let's take a look…
Missing the Signals
According to this company's third-quarter earnings report, the biotech's blockbuster drug, one of the most successful pharmaceuticals ever, is quickly losing steam less than a year after its debut.
That may be true, but here's what Wall Street missed.
Those sales are slowing down for a simple but lucrative reason. The company is set to release a new drug that will soon replace this blockbuster – and that may do even better.
On Oct. 28, Gilead Sciences Inc. (Nasdaq: GILD) said sales of its hepatitis C treatment Sovaldi fell by 20% from the second to third quarter. Analysts called for sales of $2.93 billion but they came in 4.4% short at $2.8 billion.
The company reported adjusted earnings per share of $1.84. That missed the Street's consensus estimate of $1.92 by almost the same amount as the shortfall in Sovaldi sales.
And the arrival of Gilead's new drug is not the only signal Wall Street missed.
First, Gilead had blowout earnings for the period – they soared a stunning 254%.
Second, Sovaldi is almost certainly going to go down in history as one of the more successful drugs ever launched. In roughly 10 months, it racked up sales of nearly $8.7 billion treating 117,000 patients.
Just One "Hiccup" for This Biotech Stock
And then there's that new hepatitis C treatment.
Less than three weeks before the earnings announcement, Gilead received U.S. Food and Drug Administration approval for Harvoni. This compound combines Sovaldi with other ingredients. And that means patients will need to take only that one drug over a course of 12 weeks of therapy.
A round of treatment with Harvoni costs $94,500, but it is much more convenient and may also prove to be more effective than Sovaldi.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.