If You Own Just One Pharma Stock, Make It This

As I’ve said before, buying a drugmaker stock with true billion-dollar “blockbuster” potential is like grabbing a license to print money. Of course, it’s always at least possible to grab these shares on their way up, but that’s a little like fixing the barn door after the horses have bolted.

For the biggest possible pharma profits, investors have to look ahead into the firm’s “pipeline,” its arsenal of yet-to-be-released drugs that’s critical to keeping a drug company competitive in the long term. Today, I’ve got the perfect “Buy” recommendation for a company that’s doing just that…

Why It Pays to Beat the Market on Pharma

Gilead Sciences Inc. (Nasdaq: GILD) is the perfect example of how getting into a stock just before a blockbuster is released can make the difference between a huge windfall and a loss. Gilead was one of the first companies to develop a one-pill-a-day regimen for HIV/AIDS. It then took this technology and applied it to the hepatitis C virus (HCV). Before these drugs, an HCV infection meant open-ended medical supervision. For insurance companies, that’s an extremely expensive proposition.

But a 12-week round of treatment with Gilead’s Harvoni or Sovaldi costs around $100,000. And the cure rate is in the upper 90% range. For insurance companies, that’s a no-brainer. Harvoni and Sovaldi have become two of the most successful drugs of all time since their 2013 launch. By now, the two have brought in about $20 billion in revenue for Gilead. Gilead investors realized tremendous gains from these drugs, better than doubling their money since before Sovaldi’s debut. Now, here’s where a strong pipeline can make all the difference…

Investors who bought at or near the top haven’t benefited much from Gilead’s strong performance. Instead, they’ve lost some money as Gilead is off 35% in the past 12 months.You can see the performance is like night and day, and that gets at the heart of the pipeline’s importance.