Gilead good to go

I just keep finding large US biotechs which offer a great risk-reward ratio. I have already bought some Genzyme and am waiting for an opportune moment to buy some Genentech. Next up is Gilead (GILD).

GILD was founded in 1987 and is headquartered in Foster City in California. It focuses on anti-virus products, in particular HIV but also hepatitis B. GILD also has Tamiflu which targets bird flu.

The market cap. is $30 Billion, the growth rate is over 30% and the 2007 PE is 22.

GILD has just paid $2.5 Billion for Myogen, whose main drug, ambrisentan, is awaiting FDA approval. Any additional revenues from ambrisentan are not factored in to the 2007 forecast.

Approval of ambrisentan could occur as soon as this month and a jump in the share price should be expected if the FDA accept it.

One worry is that R&D spending is only 13% of revenues at the moment. I like to see biotechs spends more on R&D than that and the GILD executives do mention in the latest conference call that they are seeking to address the imbalance.

This is a very short summary of GILD but my time is up.

I have only recently discovered biotechs but I think they offer a better risk-reward compared to some of my technology holdings. For example Qualcomm is on a similar 2007 PE to GILD but is growing slower and is battling serious competitive risks at the moment. Technology stocks will be hit by a recession whereas biotech stocks should not.

I play to rework my growth portfolio significantly, selling Qualcomm and possibly Google and buying Genentech, Gilead and possibly Amgen. Then I will be well placed to exploit any re-rating of big biotechs in 2007.

Happy hunting.