By: stalwar

stalwar — Thu, 05 Jan 2017 11:08:13 +0000

v glad to see TA on these names. in case it interests here is one long-term fundamental perspective on GILD & BMY and investor sentiment
GILD are leaders in 2 diseases: HIV and HCV (Hep C) from which they earn really massive amounts of cash (by far highest revenue per employee in biopharma). Their troubles began a couple of years ago with the HCV business, when they had the gall to introduce a cure for hep C which means no recurring revenue per patient and now nobody knows how fast the business will decline (revenues peaked last year) as fewer patients are left and competition heats up (MRK, ABBV, JNJ), which helps explain the ‘cheap’ PE. In the meanwhile, their internal R&D programs in other diseases have all failed miserably. Most importantly, they are sitting on a great pile of cash (>>$30B) and investors (at least the hedge funds) are sick to death that they are doing nothing with it (all the while insisting on ‘discipline’ while there peers, like CELG, gobble up assets and are rewarded) and because many investors can’t time M&A and care about their time horizons they’ve left the scene. The use of cash to buy growth is all that matters now, and the moment it is employed, investors will return. One signal was given yesterday with the hiring of head of oncology from Novartis (taken to mean maybe the company is finally succumbing to pressure to build and buy other businesses). My own view as a very long term institutional holder of GILD is that mgmt, however celebrated, is not immune to the performance of their stock, and we will see cash deployed sensibly some point soon (larger targets may include a company called INCY – and even BMY itself). Sentiment on GILD is terrible, so all the better. I know nothing about TA (but trying to learn how to best combine it with FA) but for what its worth my DCF model says that the current business is worth ~$75ps WITHOUT assuming pipeline success or good use of cash. This is where the stock has settle for a while and suggests lots of option value for the long term investor. It is v rare historically to see biopharma stocks trade lower than their DCF without value ascribed to pipeline (its usually where the value chaps always step in to buy).
About BMY: on fundamental basis the ‘high’ PE means v little in biotech. BMY was actually v cheap on PE if we looked 5 years out given their leadership in the new cancer areas (called Immune Oncology) but a major trial failed (they assumed gutsy development risk) and investors feel they have surrendered the lead to MRK (true, for now). In the short term they will continue to reel from this and nobody wants to step in – but in the long term they will continue to be a major IO player, with high-quality assets, and a lot still has to play out (a single trial readout this year from a certain IO combination- could transform fortunes again although for myself I’m not betting on it). They are now an M&A target for many of the sorrowful big companies that missed the IO cancer opportunity. It also makes great sense for GILD – but I’d say it would represents a real integration challenge for that company.

By: Ruben

Ruben — Wed, 04 Jan 2017 17:02:25 +0000

In reply to stock51. Randy nice call on GILD !

By: LUV737

LUV737 — Wed, 04 Jan 2017 15:51:35 +0000

In reference to BMY. The move up is a 38.2% fib of the total down move from the top! It could definitely turn here but at the 50% fib there is the 200MA on the daily chart! Because the indices are still moving up I may take a short when the it hits the 50% fib! It seems a confluence of indicators work better for me! I really enjoy your analysis and all your hard work!

By: stock51

stock51 — Tue, 03 Jan 2017 21:21:01 +0000

I own Gild and PFE. Non have done well last year.
PFE has a good dividend.
Jake

Comments on: Technical Outlook for GILD & BMY

By: stalwar

By: Ruben

By: LUV737

By: stock51