Gilead Analysts Trim Expectations After 'Very Unexpected' Adverse FDA Ruling

Gilead Sciences, Inc. GILD faces a regulatory setback as filgotinib,  an investigational drug it is co-developing with GALAPAGOS NV/S ADR GLPG, received a thumbs-down from the FDA.

The Gilead Analyst: BofA Securities analyst Geoff Meacham reiterated a Neutral rating on Gilead and lowered the price target from $82 to $79.

Cantor Fitzgerald analyst Eliana Merle reiterated an Overweight rating on Gilead and reduced the price target from $86 to $84.

Merle also reiterated a Neutral rating on Galapagos shares and pulled down the price target from $192 to $134.

Filgotinib Rejection Reflects FDA's Cautious Stance, BofA Says: Filgotinib, a JAK inhibitor, is not key P&L contributor for Gilead, but was expected to fetch $470 million in sales in 2022, BofA's Meacham said in a Tuesday note.

Much of the disappointment is likely due to the FDA's concerns about the benefit/risk profile of the 200mg dose that suggest the agency may not be receptive to approving a high dose, the analyst said.

The availability of both 100mg and 200mg doses may have been a key differentiator over AbbVie Inc's ABBV JAK inhibitor Rinvoq, which was approved last year, he said. 

The rejection exemplifies regulator's caution on the class of drug, which could limit upside for Gilead given the mixed efficacy data for filgotinib in ulcerative colitis, Meacham said.

"But with US approval now delayed 12 months (the CHMP recommended EU approval in July) and additional potential commercial headwinds, we continue to be cautious." 

Overall, Gilead continues to be fundamentally sound given the strength of its HIV portfolio and HCV's cash generation, the analyst said, adding that BofA remains sidelined due to a lack of clear near-term growth drivers.

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Cantor Says FDA Rejection Unexpected: The complete response letter for the filgotinib filing in rheumatoid arthritis was "very unexpected," Cantor's Merle said in a Wednesday note.

The FDA has requested data from the MANTA and MANTA-RAy studies, both of which are expected in the first half of 2021, the analyst said.

The MANTA studies are focused on evaluating testicular safety and sperm parameters, she said. 

Cantor adjusted its probability of success for filgotinib in rheumatoid arthritis from 100% to 80% and pushed its U.S. launch estimate out to 2023, assuming a Class 2 resubmission and six-month review following MANTA data.

Further downside could be ahead if the 200mg dose is not ultimately approvable in the U.S., Merle said. 

"However, the more concerning aspect of the CRL, in our view, is the FDA's concern regarding overall risk/benefit at the higher 200mg dose."

The 200mg dose will be key for the U.S. commercial opportunity for filgotinib given the competitive landscape, and this could be a a swing factor in the size of the ultimate U.S. opportunity, the analyst said. 

GILD, GLPG Price Action: Gilead shares were down 4.19% at $66.16 at the time of publication Wednesday, while Galapagos shares were plunging by 24.74% to $141.56. 

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