GILD - Gilead Science

[feynmanresearch]

The market seems to worried Sovaldi will be replaced by a HCV pill with a shorter treatment duration in a couple years. Meanwhile, Gilead is working on their own improvement for Sovaldi and I have heard from a few friends working in the biotech industry that they believed GILD competitors were working on injection based treatments rather than oral based treatments.

 

GILD at 10x earnings is ridiculous to me. One of the best pharma companies out there produces a hit drug and the market discounts them 50% because the blockbuster is too good to last? If Sovaldi only lasts another two years before revenue being halved, GILD still appears to be priced a little cheaply with their drug pipeline thrown in for free.

 

The market valuation is indeed absurd. The market is saying you are developing a market leading product, with almost monopolistic characteristics, so we will discount you heavily. I don't know in what universe that capitalism exists where that kind of thinking can be regarded as rational.

[rpadebet]

I've changed my mind.

 

http://procrasti-nation.eu/wp-content/uploads/Shut-up-and-take-my-money.jpg

 

:). I thought it was super interesting.

 

I also think that GILD could be in for a slew of problems. The patent expiration is going to be difficult as others mentioned, even assuming TAF extends their HIV dominance. HCV has competition from AbbieVie, Merck, and BMY (and I thought JNJ [through Janssen]). It is recommended that doctors review HCV updates prior to each decision because the understanding of the virus is changing that rapidly! Sofosbuvir (Sovaldi) is the current standard care treatment for HCV; a massively important designation to GILD's profitability. The concern (and I think, the cause of GILD's apparent undervaluation) is that one of the competing therapies (treatments?) for HCV will supplant Sovaldi and GILD will see a ~$7b-$8b decrease in earnings/FCF instantly! Have you handicapped this event?

 

I included some background on the 2 viruses, especially HCV. The last article I cited is especially important (not necessarily the content so much as the concern presented) in that current HCV therapies only save costs over the life of the patient. Without a single-payer health care system, the concern is that no one will want to pay for these treatments because patient mobility between insurers is relatively high. Also, this year CA became the first state to cap monthly deductibles for patients with high-priced medicines such as GILD's HCV therapies; MA and other states are close to passing similar or identical versions of this. This is going to significantly impact who and how much is paid for expensive treatments (including both HIV and HCV). Regardless of the effect of this specific legislation, it seems clear that there is sufficient appetite to drastically reduce drug prices (which have grown for well over a decade at 20%-25% rates!).

 

Unless you have some insight into these issues, I think GILD is far from a no-brainer. The multiples obviously mean nothing with biotechs because there is an expiration to their revenue streams. What good is a 12x multiple if the majority of revenue that generates those earnings will expire in 5 years? It's all about PV of future finite cash flows.

 

Histories of viruses GILD focuses on:

HCV: http://hcvadvocate.org/hepatitis/factsheets_pdf/Brief_History_HCV.pdf

http://onlinelibrary.wiley.com/doi/10.1002/cld.1/epdf

 

HIV: http://www.iss.it/publ/anna/2011/1/47144.pdf

 

Current HCV Treatment:

http://www.liver.ca/files/Professional_Education___Partnerships/Information___Resources_for_HCP/CASL_Hep_C_Consensus_Guidelines_Update_-_Jan_2015.pdf

http://www.easl.eu/medias/cpg/HEPC-2015/Full-report.pdf

 

Less technical article on HCV drugs:

http://www.medscape.com/viewarticle/849254

 

I think this is well put. Those are exactly my concerns with GILD.

Biotech companies should be valued like a limited duration asset using individually estimated cash flows for each drug instead of applying a multiple to aggregate trailing cash flow. Multiples can easily look small when your cashflows are peaking and expensive when your cash flows are at the trough just before a major breakthrough.

 

This is why the only Bio company I am invested in is VRX. they have many small products, not dependent on patent cliffs as much and are also not dependent on insurers paying for the drugs. It is kind of like a consumer products company dealing with only medical products. they spend limited money on R&D and buy products from other companies or the companies themselves at decent prices.

[giofranchi]

I am opening a position in Gilead today.

John Martin has done a wonderful job building GILD into the great company it is today. Though GILD is R&D based, they have bought 11 companies in the last 10 years, and established numerous partnerships with smaller biotech companies, showing they can grow inorganically too.

Martin is only 63 and could be at the helm for at least another decade.

During the last 5 years GILD stock price has increased 6x, and yesterday they have declared a 37% increase in sales… Yet, the stock is trading at 9.5x TTM adjusted EPS. Too cheap imo, even considering lots of products that might lose patent protection in the near future. I believe today’s price is a very good entry point.

As always, I am leaving room to average down, should sales take a hit in the future.

 

Cheers,

 

Gio

 

[feynmanresearch]

Not my comment, but this is a very interesting perspective on Gilead and bio-tech industry:

 

"How to value a biotech company? There's a question merits being broken down into its constituent parts, so let's take each word in turn.

"How to" The Vault Guide tells us that there are three methods of valuing a company. I interviewed so many candidates for investment banking analyst positions that I would have to commit suicide if I repeated them again, so I won't. Look em up if you really care--the short answer is that the "how" of valuing biotech companies isn't dramatically different from the way you value industrial companies or tech companies. The metrics differ, to be sure, as do the parameters. I can't think of anyone who pays attention to GAAP EPS in biotech; it's either Adjusted EPS or (since most biotechs are loss-making) something related to sales.

 

But there is one salient difference from other industries: You can't sell drugs in the US, or most countries for that matter, without approval from the national health authority. Until FDA or EMEA says your drug works, or at least determines that it doesn't kill people faster than the disease it's indicated for, there is no guarantee that you will sell any of it. Hence the need for biotech investors and companies to base valuations off of expected sales, which are sales estimates adjusted by probabilities that have been derived from years and years of data on drug approval/rejection rates. Companies, hedge funds and most sell-side analysts do this. There's another way to account for the risk of regulatory rejection, which is to simply bump up the discount rate that you apply to future cash flows--some sell-side analysts do this, but for their sake I won't say their names.

 

"value" A couple of weeks ago, a banker told me a funny joke (well, funny for biotechies): "Knock knock." "Who's there?" "Gilead." "Gilead who?" "Gilead Sciences Inc., the most successful biotech hedge fund of the last decade."

For those of you who aren't "in the know", Gilead is not a hedge fund at all. It's a regular corporation, a biotech company that's based, like many biotech companies, in Northern California, and was founded in the first great boom of biotech sometime in the 1980's or so. It is also currently worth about $160 billion dollars. It's the biggest biotech company in the world by market cap, eclipsing even Silicon Valley's other legend, Genentech, when it was gobbled up by Roche in 2008. Gilead is 2.5x as valuable as Hewlett-Packard, 4x as valuable as EADS, the world's largest airplane manufacturer, almost 3x as valuable as Ford Motor Co., barely smaller than Oracle, and comfortably larger than two of the five Oil Supermajors.

If you had bought a share of Gilead in September 2004, your split-adjusted return since then would be about 1,100%. There are probably hedge funds that have returned more, but unlike them, your share of Gilead wouldn't have cost you 2% of your basis and 20% of the profits in good years. Unlike many hedge funds or other highly acquisitive companies like Pfizer, Gilead has an astonishingly good track record of creating shareholder value through investing in external growth. In one of the most spectacularly successful M&A deals that the US healthcare industry has ever seen, Gilead paid $11 billion in late 2011 for Pharmasset. The notes the next morning were brutal. "Overpaid." "Significant development risk." "Don't understand the thesis." Blablabla. Three years later, the company has more than quintupled in value, and the drug that Gilead acquired with Pharmasset, PSI-7977 (sofosbuvir) is expected to exceed that purchase price in annual sales.

What is one to take from this parable? Well, I think it boils down to 3 things: You can be denounced as a fool until suddenly everyone realizes you are a prophet. Biotech companies hate being "value" companies. They want to be "growth" companies. Value in biotech is not relative. It's absolute.

 

"a biotech company" Wait, what? What's so complicated about "a biotech company"? Well, start with the obvious problem: "Biotech company" is about as specific a term as "tech company". Is AAPL a tech company, or a consumer company? Is AMZN a tech company or an internet company? What about IBM? Oracle? Strictly speaking, the healthcare-oriented meanings of biotech refer to the relatively recent ability of humanity to harness biological processes to make drugs or detect diseases.And many, perhaps most "biotech companies" do exactly that--use biological processes to make drugs. Gilead does that. Amgen does that. Genentech, now owned by Roche, does that. So do Vertex, Alexion and Regeneron. Unlike the traditional drugs that your grandmother force-fed to your mother, "biotech drugs" like recombinant proteins, monoclonal antibodies and kinase inhibitors are made with the help of processes that are, in many ways, far smarter and far more efficient than anything human minds could ever have come up with on their own.

 

But quite a few prominent biotech companies have very little to do with these types of drug, or are not valued solely on the basis of these drugs if they have them in their portfolio. The newest blockbuster drug to hit the market from Biogen Idec, an enormous company that plays heavily in the nervous system diseases space, is a multiple sclerosis drug called Tecfidera®; if you used to work with leather a lot, you might know it by its generic name, dimethyl fumarate, and as a chemical entity, it has been very known for decades. It was used to treat leather so as to prevent mold growth. Another gigantic biotech, Celgene Corp., was actually spun out years ago from a big industrial chemicals conglomerate called Celanese Corporation. Celgene has a dynamite franchise of drugs for blood cancers and multiple myeloma: REVLIMID®, Pomalyst® and THALOMID®. All three are derivatives of thalidomide, which like Tecfidera was known to doctors decades ago and prescribed as a treatment for morning sickness (this usage eventually stopped, because thalidomide causes ghastly birth defects). Clearly, then, being considered a biotech company doesn't really have much to do with how complex the molecules are that drive your core revenue streams.

 

Adding to the confusion is the existence of hulking old Big Pharma companies that are increasingly starting to look like biotech companies. Nobody doubts Pfizer, Merck & Co. and Johnson & Johnson are pharma companies, but there's a small chorus of people who think that another stalwart of the American drug business, Bristol-Myers Squibb Co., behaves a lot more like biotech than pharma. Certainly on a multiples basis it trades at a premium to some of the Big Biotechs I mentioned above, which would appear to be a violation of the conventional wisdom that biotechs are more expensive because they are faster-growing. French pharma giant Sanofi SA scooped up Genzyme, a maker of biologic drugs for extremely rare diseases, and holds a big chunk of Regeneron, another biologics company that does cancer and eye diseases. AstraZeneca plc fended off an unsolicited offer from Pfizer in part by arguing to shareholders that it ought to be valued like a biotech rather than a pharma, which is to say, big dependence on a "pipeline" of highly speculative immunotherapeutics, for things like cancer.

 

To be sure, nobody claims that Sanofi or AstraZeneca are biotech companies, nor is anyone about to do so. But what exactly constitutes a biotech company is now a very nebulous concept. There was a point in time when biotech could be distinguished from traditional pharma by the discovery, research and development methods used; but now, those methods are used in drug development everywhere. One might have argued some years ago that the chief distinction between biotech and pharma was simply one of higher multiples to give credit for faster growth potential. Perhaps, but that is no longer the case. Many pharma's, like AstraZeneca, BMS and Takeda, have gone on acquisition sprees in attempt to gain some of the biotech mojo (with varying degrees of success), and there has been a considerable amount of cannibalization among biotechs too. A few years hence, the distinction between biotech and pharma may disappear altogether. A few years ago on CNBC, I saw Sam Isaly, one of the founding partners of the brilliant life sciences hedge fund OrbiMed Advisors remark that it was perhaps just a matter of time before the Big Four of biotech--Gilead, Amgen, Biogen Idec and Celgene--either got acquired by pharma companies...or themselves went out and acquired pharma companies, thereby dissolving the barrier between the industries for good"

 

[Guest Schwab711]

I really want to like GILD. From what I heard when they reported, HCV competition is picking up. Can anyone comment on the relative efficacy there? TAF approval seems extremely likely at this point. If something goes wrong with TAF ("me too" drug with some benefits), GILD will drop like a rock.

[feynmanresearch]

I really want to like GILD. From what I heard when they reported, HCV competition is picking up. Can anyone comment on the relative efficacy there? TAF approval seems extremely likely at this point. If something goes wrong with TAF ("me too" drug with some benefits), GILD will drop like a rock.

Not really.Gilead's HCV products are markedly superior to their competitors. The efficacy of Harvoni/Sovaldi is miles ahead of its competitors, with much less side effects. If you dig deeper, you will see that Gilead HCV treatments have effectively treated a huge number of patients, with very few complications and side effects-Gilead competitors are playing checkers, while GILD is playing chess

[Guest Schwab711]

I really want to like GILD. From what I heard when they reported, HCV competition is picking up. Can anyone comment on the relative efficacy there? TAF approval seems extremely likely at this point. If something goes wrong with TAF ("me too" drug with some benefits), GILD will drop like a rock.

Not really.Gilead's HCV products are markedly superior to their competitors. The efficacy of Harvoni/Sovaldi is miles ahead of its competitors, with much less side effects. If you dig deeper, you will see that Gilead HCV treatments have effectively treated a huge number of patients, with very few complications and side effects-Gilead competitors are playing checkers, while GILD is playing chess

 

Thanks. I'll have to do more work on the HCV market. Are you long GILD?

[feynmanresearch]

I really want to like GILD. From what I heard when they reported, HCV competition is picking up. Can anyone comment on the relative efficacy there? TAF approval seems extremely likely at this point. If something goes wrong with TAF ("me too" drug with some benefits), GILD will drop like a rock.

Not really.Gilead's HCV products are markedly superior to their competitors. The efficacy of Harvoni/Sovaldi is miles ahead of its competitors, with much less side effects. If you dig deeper, you will see that Gilead HCV treatments have effectively treated a huge number of patients, with very few complications and side effects-Gilead competitors are playing checkers, while GILD is playing chess

 

Thanks. I'll have to do more work on the HCV market. Are you long GILD?

No problem. Yes, I am. I would recommend DoctoRx articles on seekingalpha if you want to learn more about the technical side of Gilead's products, he's one of the best analysts out there

[feynmanresearch]

Word of caution: Mr.Market has been pretty indifferent towards Gilead for quite a while

[walt373]

GILD is a prime example of a great company being punished for being great.

Agree with you here. It would make sense to discount the stock if Sovaldi/Harvoni was a fluke. But the Pharmasset acquisition wasn't a fluke - it was the latest win in a long history of excellence. The acquisition was made because they had the ability to see potential where other companies did not. It's more proof that they have some secret sauce that makes them industry leaders, be it management, employees, culture, or processes, and the market isn't giving them any credit for it. Instead of treating their success with enthusiasm, it's met with skepticism. The stock has only done well because the market begrudgingly gave it respect as profits just went bananas. And by the way, they have been taking advantage of said skepticism by buying back stock like crazy... for the past decade. That's proven to be another great investment. Imo it'd be less weird if GILD was trading at 40x earnings and value investors weren't giving it a second look except maybe as a short. The market's being too clever by half this time I think.

 

Regarding the concern of drug sales falling off a cliff after all HCV patients are cured, here are some numbers for perspective:

 

HCV patients treated w/ Sovaldi in 2014: 140,000

US HCV population: 3-4 million

Japan HCV population: 1.5-2 million

Europe HCV population: 5-10 million

World HCV population: 150-200 million

 

Here's an informative article on Sovaldi/Harvoni and HCV: http://www.pharmexec.com/pharm-execs-2015-brand-year-sovaldi-and-harvoni-hepatitis-c

[Picasso]

Anyone have any really good bear cases here?  There's a lot of what I would consider "dumb retail money" in this stock but I think the pressure on the rest of biotech must be putting some liquidation pressure on this stock.  I'm curious if anyone has quantified why this is a good short.

[Guest roark33]

I am interested around here.  I think the short case is pretty easy:

 

1. HCV revenue and profitability decline due to pricing issues (both politicians and Merck competition).

 

2. Pipeline may be worth nothing.

 

3. Mgmt will need to buy something and that won't work.

 

4. Continued biotech weakness given the nose-bleed valuations among the group.

 

It's a tough one to get fully comfortable with since it is easily outside most people's general knowledge. 

 

My general view is the S/H products have such good results that the scripts will continue (doctors will just continue to prescribe what works instead of the new drugs), but potentially at a lower price, i.e. the runway will be long but at a lower price.  I think GILD has done a great job of "price discriminating" in a new way.  The sickest patients were charged 80k or whatever and the newly diagnosed will be cured in 3 years at 20k.  The warehousing of patients has provided them a unique way to charge more for "early admission."  No one wants to openly discuss this price discrimination idea, but I think it's pretty clear that was what they were thinking. 

 

Back of the envelope, I don't think it is super cheap, but the HCV drugs pay for current valuation and pipeline and M&A by smart mgmt provide upside. 

 

 

 

 

 

[Picasso]

That's sort of my thinking here too.  Basically you can run the HCV drugs down to zero over time and get pretty close to the current market cap.  You have other capital allocation/pipeline to drive upside plus the potential that HCV isn't as much of a tail product as the market expects.

 

The thing that worries me most, and it's going to sound silly, is all the Seeking Alpha commentary.  If there's any negative article on GILD you get like 200 comments from people just absolutely trashing the author.  I've never seen one of those stock work out well or if it did, it didn't give that great of a long-term result. 

 

Here's an example:

 

http://seekingalpha.com/article/3802946-gilead-competition-flat-sales-and-a-broken-stock

 

You get comments like this:

 

This fellow is looking at Gilead with diarrea coloured glasses . Go Gilead !

 

No worries, the one's here with the cajones enough to be shorting gild will soon have blown up accounts! The clock is ticking..

 

And there's a lot more where that came from.  That alone makes me want to really make sure this thing is cheap and check out how one justifies shorting at this valuation beyond the known HCV tail worries.

[Jurgis]

OT?

 

The thing that worries me most, and it's going to sound silly, is all the Seeking Alpha commentary.  If there's any negative article on GILD you get like 200 comments from people just absolutely trashing the author.  I've never seen one of those stock work out well or if it did, it didn't give that great of a long-term result. 

 

AAPL?  8)

 

Although you could argue that AAPL fanboys love both the product and the company, so that's the difference...

 

You are right that this creates a potentially big air pocket if the company disappoints somehow and the fanboys all rush to sell.

[Jurgis]

So now we know the bear scenario so far:

 

- MA AG going for GILD

- Competing (cheaper?) drug approved for Hep C

- CEO leaving

 

Unfortunately with CEO leaving, I'm not adding unless stock falls even more. I'll keep my current position.

[Viking]

GILD just released Q4 earnings and they beat on both revenue and earnings per share. In 2015 they earned $11.91/share; with shares trading today at $83 the trailing PE is about 7.

 

Guidance for 2016 for net product sales = $30-$31 billion.

 

Here is guidance last year:

Feb = $26-$27

Apr = $28-$29

July = $29-$30

Oct = $30-$31

Actual 2015 = $32.1

 

It looks to me that management is very cautious when providing guidance.

 

Shares outstanding at Dec 31:

2015 = 1,422  -77 million = 5.1%

2014 = 1,499

2013 = 1,534

 

In Q2 of 2015 company spent $3.9 billion on warrants that reduced fully diluted shares outstanding by 32 million shares (over Q2 and Q3). At Sept 30, 9 million warrants were outstanding.

 

During the conference call the company said the current environment for acquisitions is very good (biotech is on sale). GILD has lots of $ for acquisitions. They also will be executing an accelerated share repurchase plan in Q1 of $5 billion in addition to normal purchases; this could reduce shares outstanding by 5% in Q1 alone.

 

The key is how long you estimate the HCV gravy train to last. My read is GILD has a very strong management team with a very good long term track record. Looks pretty compelling at $84.

 

PS: some similarities to Apple in how Mr Market is viewing the business. Apple is considered a one trick pony with iPhone. Similarly, GiLD is viewed as one trick pony with Hep C drugs. Both companies have very good management teams, very good long term track records and are very shareholder friendly. And most importantly, the shares of both companies are very much out of favour with investors and down more than 30% from their highs in 2015.

[Viking]

Very good summary of GILD by Seeking Alpha author DoctoRx: http://seekingalpha.com/article/3859476-gilead-reports-record-results-street-remains-bored-next

[gjangal]

Wanted to bump this thread up to see if anyone thought this was cheap here. Questions around sustainability of revenue, peak revenue exists and their reliance on Harvoni and Solvaldi. Management is guiding towards 30.5B revenue for 2016 and in similar range for 2017.  Even assuming single digit rev declines for 2017, I cannot see EPS go down below 10$. Some 2016 numbers

 

Revenue : 30.5B

GM: 85%

R&D Expenses: 3.8B

SG&A : 3.1B

Shares outstanding : 1.5B

Effective Tax Rate: 20%

 

Stating the obvious, but there is a certain degree of operating leverage built in so declines in income will be more pronounced with revenue declines. Management has been historically quite good with product pipeline. IMO, the chances of downside is pretty low at this level unless there is a drastic decline in revenue

 

 

 

[Viking]

Gjangal, at $80 the stock looks cheap to me. However, sentiment is very bad; the last two earnings releases (and conference calls) have not been great. The big issue is management is struggling to provide accurate guidance on Hep C sales and margins. Absent new news in the short term it is hard to see the stock popping. However, over the medium term there is lots to like about GiLD at $80. Seeking Alpha has a large number of articles on GILD and a couple of the authors are quite good.

[gjangal]

If you invert the numbers, it looks like market is pricing in a 6B decline in net income from the HCV drugs, but giving no value to product pipeline (I haven't gone into details on this one) or management. I read the DoctorRx article in your link above, interesting points to me were  the efficacy and the safety profile of their drug vs competition (ABBV and MRK). It looks like they have a superior product which is hassle free (single dose regimen vs Viekira).

[Jurgis]

Disclosure: I own some GILD.

Usual disclosure: I bought a lot of GILD in 2010, sold everything in 2011 when they purchased Pharmasset, since I thought they overpaid. Missed 10x and all that.

 

Based on general valuation, it is cheap.

Also in the recent past whenever drug companies were valued low due to the pipeline issues, they usually produced more and surprised on the upside.

 

On the other hand, I am not pharma expert. IMHO, you pretty much have to understand pharma and drug markets to invest in pharmas. ;)

 

One issue with GILD is new CEO. It is not clear how good he is. It is possible that Martin left at the top and left the new CEO deal with the crap fallout.

[Mungerish]

Read this in a Q letter recently. Sounds similar

 

• Biotech “A”. (3% of Capital) While we have invested in biotechnology and Pharma companies in our personal accounts in years past, it is generally not an industry where we actively pursue value opportunities. The reason that these companies do not make good long-term investment candidates for our Fund is that we do not believe that we are qualified to make reasonably accurate judgments about the efficacy or prospects of these companies drug pipelines. In value speak, we consider that ability “outside our circle of competence”. On rare occasions however, the market will so misprice a particular security that we believe making the kind of judgment described above is not necessary to make an intelligent allocation of capital. This is the situation upon which we find ourselves.

Biotech “A” manufactures and markets some truly amazing, award-winning drugs which not only save lives, but in many cases effectively permanently cure life-threatening disease through an eight to twelve-week treatment regimen. The company rationally priced these drugs below the previous cost of inferior care, but at levels which made some news editors and reporters jobs easier than usual. The issue of drug pricing in general had become politicized and a congressional inquiry followed. The report issued by Congress found that Biotech “A” priced the new drugs to “maximize their profit”. Of course, that behavior is what every good business manager and steward of shareholder capital should do. The fact that they had paid over $11 billion for the technology that delivered the cure when it was only in a phase two drug trial was given little emphasis. Without the benefit of hindsight, this was a very aggressive investment. We believe their own R&D may have given them proprietary insights and the appropriate confidence in the ultimate outcome to commit that level of capital early on. There was also very little emphasis in the press of the sometimes horrible side effects associated with the previously approved drug therapies, or the continued risks and costs of the eventual necessity of an organ transplant. None of the foregoing human or monetary costs would be present or necessary any longer with the new Biotech “A” treatment regimens.

Competition is emerging to treat the same diseases and price related competition is definitely heating up. We do not believe the competing drugs are superior for many reasons beyond the scope of this letter.

What made this opportunity so interesting was that our analysis showed that even when immediately “hair cutting” the revenue these drugs generated in 2015 by as much as 50%, the company would still be trading dramatically below the multiples of its peers, without giving any benefit to the future efficacy of its drug pipeline currently undergoing numerous FDA advanced trials and studies. Although we expect declining revenues, we do not believe that these currently marketed drugs will suffer the kind of rapid decline which is being priced in by the market. We also believe there is a huge number of undiagnosed and untreated naïve patient populations around the world and in the U.S. We have currently sized the position below our normal allocation due to the technological change inherent within the industry.

The not insignificant drug R&D pipeline is a “freebie” in our valuation model

 

[Jurgis]

Biotech “A” is pretty definitely GILD.

[Picasso]

It's so obviously Biotech A that I don't know why they bothered calling it Biotech A.  Not like Gilead is a hated name like Valeant.  I'd be using super vague analogies if I wanted to pull the old Graham "Stock A" with Valeant. But Gilead?  You don't have any liquidiy issues with GILD either.

[kab60]

Which fund is that? I think it's funny that they're so sure they've found a bargain yet only allocates 3 percent of the portfolio (I have no opinion on GILD). Must be difficult to outperform if you have a portfolio of megacaps and spread your bets over +25 companies (when you also have to pay for a fancy office in Downtown Manhattan). And a 3 pct. position isn't even all that small compared to other closet indexers.