Sometimes Washington triggers a stock move that can hand us outsized gains. That's exactly what happened with Gilead Sciences Inc. (Nasdaq: GILD).
In March 2014, U.S. Rep. Henry Waxman (D-CA) lashed out at the cost of Gilead's newly approved Hepatitis C (HCV) drug, Sovaldi. Sovaldi runs $84,000, or $1,000 a pill.
But Waxman missed the obvious. Sovaldi (and its newer version Harvoni) cures 90% of HCV patients. That means patients can avoid the need for a liver transplant – an operation that runs $250,000 if an organ donor is found. And that price doesn't include antirejection drugs and antibiotics people must take for the rest of their lives.
Still, Gilead sold off on fears that its high cost would make Medicare look to another HCV drug maker with a less expensive solution. GILD stock lost 13% of its value in a matter of days.
Wall Street was dead wrong…
Medicare actually spent $4.6 billion on Hepatitis C treatments in the first six months of this year. That's almost as much as the agency spent in all of 2014. Gilead accounted for 66% of all covered prescriptions.
Simply put, Gilead dominates the HCV sector. And as I'll show you today, opportunities for the firm are growing faster…
The Profit Power of Gilead's (GILD) HCV Domination
HCV is known as a "silent killer" because it often takes many years for symptoms to emerge. In the worst case, the body can't fight the blood-borne infection, which begins to destroy the liver, causing cirrhosis or cancer.
According to the World Health Organization, 130 million to 150 million people globally have HCV, including up to 3 million here in the United States. Between 350,000 to 500,000 people die each year from HCV-related causes.
The U.S. Centers for Disease Control recommends that every one of the nation's roughly 76.5 million Baby Boomers get tested for HCV. Federal officials are worried that many got the disease through contaminated blood supplies.
Gilead's pair of HCV products make up about 60% of its revenue and brought in $4.8 billion in revenue in the third quarter. Overall, the products generated $12.5 billion in 2014 and $9.5 billion in the first six months of 2015. That makes the pair among the most successful new drugs ever launched.
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.