AIDS Drugs Power Foster City, CA Based Gilead Sciences

Foster City, CA based Gilead Sciences (GILD) has been on a tear the last 2 years – up more than 250% – on the strength of its leading suite of AIDS drugs: Truvada, Atripla and Viread.  It is also a partner, with Roche, in Tamiflu.

Barron’s ran a bullish story on them this weekend (“Gilead’s War on AIDS” (subscription required)).

One of the appeals of this company is its simplicity. 

The big pharma companies tend to have a bunch of different drugs with different patent expirations making them somewhat complicated to keep track of. 

Gilead, by contrast, is essentially a pure play on AIDS drugs – with Tamiflu thrown in for a little exra.

Revenues were up 48% in the 1st quarter of 2007 and as long as AIDS continues to be a growing problem the company should do well.

On the other hand, it could be an overly loved stock. 

I’ve never heard anybody say anything bad about Gilead.  According to the WSJ, of the 31 analysts cover the stock, 26 have “Buys” or “Strong Buys” – the other 5 have “Holds”.  That’s not good as it means there’s no possible juice from an upgrade.

According to Schaeffer’s, options players have become bearish on Gilead with recent put/call open interest ratios higher than 80% and 90% of other readings in the last year.

When I see this kind of thing, sometimes I think the options players might be ahead of the curve and Gilead is due for a hiccup.

There’s nothing not to like about the “company” but based on these sentiment indicators and the stock’s torrid run the “stock” might be due for a bit of a pullback.

Next Thursday’s (7/19) 2nd quarter earnings report should provide more clarity about the stock’s near term direction.

UPDATE (Thu 7/12, 9:15am PST): Notable calls relates that Cowen & Co. said Gilead’s fundamentals are second to none in large cap bio-tech.

I agree, like I said above, that the fundamentals, the “company”, are extremely impressive.  I just wonder if the “stock” is due for a breather.