Gilead shares surge 24% as HIV prevention sales double

Gilead Sciences, Inc. (NASDAQ:GILD) shares have climbed more than 24% this year, outpacing the S&P 500's 14% gain, driven by strong growth in its HIV prevention portfolio. The pharmaceutical company, which produces drugs for HIV, liver disease, and cancer, reported second-quarter sales that rose 10% year over year, marking its strongest growth for that period in three years.

The performance was fueled primarily by the HIV division, where sales increased 12%. Gilead's prevention business saw rapid expansion, with Descovy sales jumping 48% and total pre-exposure prophylaxis (PrEP) sales doubling. Consequently, the company raised its full-year 2026 HIV sales growth outlook to 9% to 10%, up from a previous estimate of 8%. Baron Health Care Fund noted that the stock gave back some gains in the second quarter following a strong start to the year tied to the launch of Yeztugo.

While reported earnings appear weak due to accounting rules that required expensing the value of unfinished research from recent acquisitions of Arcellx, Tubulis, and Ouro Medicines, analysts point to a durable competitive edge in HIV. Patients rarely switch treatments once stable, and Gilead now offers prevention drugs alongside therapies. The company has launched twice-yearly Yeztugo, and the FDA has accepted an application for a once-weekly oral PrEP pill. Gilead also extended licensing deals in September to cover an investigational once-yearly shot. In March, the company's chief financial officer stated that Gilead faces no major loss of exclusivity until 2036.

Beyond HIV, Gilead is expanding its pipeline with new products. The FDA will decide on anito-cel, a multiple myeloma cell therapy from the Arcellx deal, on December 23. Trodelvy gained clearance for initial treatment of triple-negative breast cancer, while Hepcludex became the first FDA-sanctioned therapy for hepatitis delta. Additional antibody-drug conjugates and an autoimmune therapy are entering the pipeline through the Tubulis and Ouro acquisitions. Institutional interest remains high, with 76 hedge funds holding the stock at the end of the second quarter.

However, risks persist. Gilead relies heavily on HIV for product sales, and its largest drug, Biktarvy, is on Medicare's price negotiation list. The negotiated price takes effect in January 2028 and could slow HIV growth to single digits. The company's cash position fell sharply this year as it paid for its acquisitions. Additionally, cell therapy sales dropped 14% due to competition, and sales of the COVID drug Veklury declined significantly.

Valuation metrics are complicated by acquisition charges, rendering trailing and forward P/E ratios not meaningful on most data sites. Yahoo Finance places Gilead's normalized forward P/E at approximately 15.5, compared to the S&P 500's forward P/E of 19.1. The company reported that illustrative earnings per share, which exclude acquisition charges, grew about 13% in the second quarter and 7% in the first half. Gilead guides to base business sales growth of 6% to 7% in 2026.