We recently compiled a list of the 12 Best Biotech Stocks To Invest In According To Hedge Funds. In this article, we are going to take a look at where Gilead Sciences, Inc. (NASDAQ:GILD) stands against the other biotech stocks.
As we have mentioned in our article, “10 Best Penny Stocks to Buy Under $1,” the size of the global biotechnology industry was assessed to be worth $1.38 trillion in 2023 and is expected to grow at a CAGR of 11.8% from 2024 to 2033, predicted to be worth around $4.25 trillion.
Specifically, the U.S. biotechnology market was forecast to be $246.18 billion last year, and at a CAGR of 11.6% from 2024 to 2034, it is expected to be worth approximately $830.31 billion as per Precedence Research. North America’s revenue share was 37.79%, while Asia Pacific produced a revenue share of 23.99%. In terms of revenue share by application, the biopharmacy segment had 41.73% in 2023, and the application segment for bioindustries accounted for 24.33% of total revenue. In terms of technology, the tissue engineering and regeneration market has projected a 19.26% revenue share for 2023.
According to stock analysis, there are 665 stocks in the biotechnology industry, with a combined market value of $1,559.75 billion and total sales of $127.6 billion.
However, the U.S. Food and Drug Administration and other drug authorities’ clearance decisions and research data have a significant impact on the future of these occasionally volatile equities.
It has always been necessary to have a high risk tolerance and the ability to wait years or even decades for results when investing in biotechnology stocks. The resilience of biotech investors has been put to the test by inconsistent results in recent years and thus far this year. According to Morningstar strategist Karen Andersen, biotech had a strong start to 2024, driven by an uptick in M&A and every indication that interest rates would begin to decline. However, the second quarter of 2024 has been more mixed for the industry, with rates appearing to be stabilizing rather than falling, despite ongoing (but improving) inflation. Higher rates typically deter investors from waiting for hazy returns on their biotech investments.
Andersen sees a lot of promising things in biotech as well as room for expansion, despite the recent mixed outcomes, stating:
“We still see tailwinds for the industry going forward. Smaller-cap names are still targets for acquisitions by bigger biopharma firms, and a wave of acquisitions has continued since late last year, particularly focused on oncology and immunology,” “We think obesity acquisitions are likely going forward, as big biopharma can bring development and commercialization expertise to multiple programs in midstage trials at small biotechs. Second, on a more fundamental level, new technologies and launches in new therapeutic areas are poised to boost productivity and drive biotech performance.”
Moreover, the report “Future of Biotech AI-driven Drug Discovery” states that artificial intelligence may drastically speed up drug research, cutting down on development timeframes from many years to a matter of years. Through the integration of artificial intelligence AI with drug development and biology, scientists can build customized therapies for patients. Instead of replacing scientists, AI will improve their skills by enabling them to automate repetitive operations and produce fresh insights. Companies need to go from isolated pilots to a complete, data-driven approach, integrating analytics into decision-making, and emphasizing quick, observable results that help patients and the scientific method in order to properly utilize AI.
Currently, more than 450 life sciences companies, classified as “startups” or “scaleups,” are actively utilizing machine learning and deep learning-based predictive and generative capabilities to enhance their research strategies, as per the findings of BioPharmaTrend’s report, “The State of Artificial Intelligence (AI) in the Biopharma Industry.”
Fitch Ratings also continues to maintain a neutral outlook on the global biotech industry for 2024. Despite rising interest rates, it expects growth driven by demographic trends and innovation. Although they are confronting difficulties with investment and regulation, Fitch highlights that companies are concentrating more on research and development as well as strategic changes that improve drug pricing.
We sifted through holdings of biotech ETFs and online rankings to form an initial list of 20 biotech stocks. Then we selected the 12 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A physician and a patient having a discussion in a hospital about biopharmaceutical medicines.
Number of Hedge Fund Holders: 62
The biopharmaceutical company Gilead Sciences, Inc. (NASDAQ:GILD) finds, develops, and markets drugs in areas of unmet medical need in the US, Europe, and internationally.
The company’s’ HIV and hepatitis C virus, or HCV, portfolio yields high-profit margins while requiring only a small salesforce and low-cost production. Gilead has a large moat supported by its portfolio and pipeline, but in order to grow again, it will require the HCV market to stabilize, strong HIV innovation to continue, reliable data from its oncology pipeline, and wise acquisitions in the future.
Given that lower clinical trial expenditures helped the biopharmaceutical company ‘s second-quarter 2024 results surpass bottom-line forecasts, Morningstar analysts continue to assess the company’s fair value at $97. The three main drivers of revenue growth were oncology (15%), liver disease (17%), and HIV (3%). Gilead’s top HIV drug, Biktarvy, soared by 8% and continues to be a major source of earnings, making about 46% of product sales.
The long-term patent of Biktarvy, which expires in 2033, and the potential for HIV advances support Gilead Sciences, Inc. (NASDAQ:GILD)’s wide moat. Analysts believe that shares are cheap, particularly in light of recent positive findings about the HIV preventive medication lenacapavir.
Parnassus Value Equity Fund stated the following regarding Gilead Sciences, Inc. (NASDAQ:GILD) in its first quarter 2024 investor letter:
“Gilead Sciences, Inc. (NASDAQ:GILD), a global biopharmaceutical company, saw its shares decline as a cancer drug failed to expand into additional lung indications, denting investor faith in the company’s oncology franchise. We maintain confidence in Gilead’s core HIV franchise and ability to expand into cancer treatment portfolios.”
The firm offers several HIV single-tablet regimens, and the company’s market share is increasing due to its next-generation drugs, which include Biktarvy and have better long-term safety profiles. However, Biktarvy’s effectiveness creates a patent cliff in 2033, making it difficult to improve this daily HIV treatment regimen.
Nonetheless, the company is one Best Biotech Stocks To Invest In According To Hedge Funds. John Overdeck and David Siegel’s Two Sigma Advisors is the largest shareholder in the company, with 6,255,700 shares worth $429.20 million.
Overall GILD ranks 6th on our list of the best biotech stocks to buy according to hedge funds. While we acknowledge the potential of GILD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GILD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
