With $36.7B In Cash, Bank of America Expects Gilead To Shop For Complements To Drug Pipeline

Gilead Sciences, Inc. GILD announced fourth-quarter results Tuesday that revealed better-than-expected top- and bottom-line numbers — but the guidance was lackluster.

The Analyst

Bank of America Merrill Lynch analyst Ying Huang reiterated a Neutral rating on Gilead shares and increased the price objective from $82 to $87.

The Thesis

Gilead's revenue beat was driven by ex-U.S. hepatitis C vaccine, or HCV, and U.S. HIV sales, offset to some extent by a slight U.S. HCV miss, Huang said in a Tuesday note. (See the analyst's track record here.) 

U.S. sales of HCV drugs Harvoni and Epclusa trailed expectations due to lower patient starts and market share loss following the launch of AbbVie Inc ABBV's Mavyret, the analyst said. 

The lower-than-consensus 2018 HCV guidance was widely anticipated by investors, Huang said. A stabilizing HCV beyond mid-2018 gives some comfort, the analyst said. BofA lowered its 2018 HCV sales estimate to $3.9 billion.

Gilead's HIV business remains solid, exceeding the consensus thanks to strong Truvada and Atripla sales, according to BofA. 

"With the anticipated approval of B/F/TAF in February 2018 and continued strength of Genvoya and Odefsey, we believe GILD's leadership in the HIV space will strengthen despite entry of some generic competition," Huang said. 

With the focus now shifting away from HCV and toward the pipeline, the analyst said Yescarta generated sales of $7 million in its first quarter on the market, implying 19 treated patients. BofA continues to project a gradual launch. 

BofA expects expects Phase I data for BCMA CAR-T in multiple myeloma and Phase 3 data from filgotinib in TNF-refractory rheumatoid arthritis in the second half of 2018.

Citing Gilead's $36.7-billion cash hoard, Huang said the company is likely to scout for acquisitions and partnerships to complement its pipeline.

The Price Action

Gilead Sciences shares are up about 15 percent over the past year, including the earnings-induced upside.

The stock was up 3.55 percent at $83.23 Wednesday afternoon. 

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