Gilead Sciences, Inc. (NASDAQ: GILD) has been fighting an image of being “dead money” for biotech investors for a year. Now the company has disclosed after the close on Friday that it has received a subpoena from the Department of Justice.
The exact office is the United States Attorney’s Office for the Northern District of California.
We actually have very little as to what the details are but the company said that the DOJ has requested documents related to the manufacture, and related quality and distribution practices of the company. Specifically noted were Atripla®, Emtriva®, Hepsera®, Letairis®, Truvada®, Viread® and its investigational fixed-dose combination of Truvada and EdurantTM.
Here is where the issues is going to arise… Gilead said that it “is cooperating in this civil and criminal investigation.”
CRIMINAL?????? When investors see a civil charge that is one thing. Including “criminal” in the wording with the documents pertaining to just about all of its major products and some of its research candidates is not going to fly well.
That is not exactly what shareholders want to hear about. Shares closed down 2.26% at $40.23 and its 52-week trading range is $31.73 to $42.93. The after-hours has shares trading down some 2.25% more around $39.25.
It appears that someone was concerned, or worse, today in the options trading. There was not a highly unusual share trading volume in stock during the trading day but there is elevated trading in the following PUT options:
- JUNE $40 PUTS 2,264 contracts versus a prior open interest of 2,552 contracts;
- JULY $38 PUTS 2,295 contracts versus a prior open interest of 1,361 contracts;
- JAN12 $37.00 PUTS 500 contracts versus a prior open interest of 500 contracts.
This is not highly unusual options contract trading but it does stand out at least some.
JON C. OGG
There have been some mixed results from biotech stock giants so far this earnings season. In some cases, these actually mimic Big Pharma stocks, but that is still out for debate. We have seen some research outlining some of the top biotech shares from Zacks Investment Research. Gilead Sciences, Inc. (NASDAQ: GILD) was called its BULL OF THE DAY pick. Unfortunately, shares are down 1% at $39.21 but that is not a call based upon a one-day reaction.
Zacks notes the following:
Gilead Sciences, Inc. (NASDAQ: GILD) third quarter 2010 earnings of $0.85 was well above the year-ago earnings of $0.74. The improved showing was mainly attributable to strong sales of antiviral products.
Gilead, a leading player in the HIV segment, has continued to increase its patient base. We remain optimistic about growth of HIV franchise drugs Truvada and Atripla. Moreover, the FDA approval of Cayston earlier this year is also a positive. The addition of Cayston to the company’s portfolio should boost Gilead’s revenue stream further.
We are also encouraged by Gilead’s progress with its pipeline. These positive catalysts cause us to upgrade the stock to Outperform. Based on the third quarter performance, we have raised our earnings estimate for 2010 by $0.06 to $3.50 and 2011 estimates by $0.28 to $3.94.
GILEAD SCIENCES (GILD): Free Stock Analysis Report