Truvada Should Gain Approval, Benefitting Investors

In three months, the U.S. Food and Drug Administration will rule whether or not to approve a new indication for Gilead Sciences' (GILD) Truvada. The new indication would make Truvada the first pill approved to prevent HIV infection, giving the company a huge advantage in a market it is already a leader in.

Truvada has already been on the market since 2004, and although it is only approved to be used to manage HIV, some doctors already prescribe it as a preventive measure. Studies on Truvada over the years have shown that it can prevent people from contracting HIV, according to the Associated Press.

The FDA extended its review because Gilead submitted updated information. However, there is a lot of optimism that Truvada will be approved. Last month a panel of experts recommended approval, and while the FDA doesn’t have to follow the vote, it usually does.

There is resistance to the idea of using the drug as a precautionary measure. The AIDS Healthcare Foundation opposes an approval because it believes that it could encourage risky behavior, such as not using condoms, thus “contributing to, rather than controlling, the epidemic.”

Right now, more than 75% of all treated HIV patients take at least one Gilead drug, according to SeekingAlpha. And there’s little competition at the moment. Pfizer and GlaxoSmithKline are working on HIV therapies as part of a joint venture. Their drug Dolutegravir has showed impressive results with few side effects and they might file with the FDA by the end of the year.

Merck’s drug is at a disadvantage because it is a twice-daily drug, while Truvada would be once a day. Another Merck drug, Zolinza, is in initial trials and tries to eliminate HIV completely from the body.

Despite these possible threats, Gilead would likely still remain the market leader. It helps that the company is looking to branch out. It recently acquired a cancer-drug company and a hepatitis-C oral drug manufacturer.

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Gilead’s stock right now is slowly climbing; however, it is recovering from a nasty shock it received back in February. At the time, its stock fell 14% when some patients on a hepatitis C drug relapsed once they stopped the therapy.

While Gilead’s stock hasn’t quite recovered to its peak just before the news broke on the relapsed patients, the stock is up 11% from where it had fallen to.

According to SeekingAlpha, that initial drop in Gilead’s stock price was an overreaction, especially considering that 75% of its revenue comes from its HIV franchise. Gilead has other drugs in the pipeline that should keep investors confident.

In addition to Truvada, the FDA is also considering Quad, a once-a-day pill that is more effective than Gilead’s currently marketed drug, Atripla. However, odds are looking good for Quad since the panel recommended it. And if both Quad and Truvada are approved, Gilead could be seeing a nice little boost in its share price.

The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock.

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