AbbVie Takes A Bite Out Of Gilead Sciences' Hepatitis C Market Share

Investors in biotech stocks are aware that the results from drug trials can have a profound impact on an issue's value, even more so than earnings releases, ratings or management changes.

However, other news events can also move an issue. For example, another company with a competing drug announcing a major contract with one of its competitors at a reduced price can destroy an issue.

Good News For AbbVie Is Bad News For Gilead Sciences

This is the scenario that is attempting to bolster shares of AbbVie Inc ABBV and is having a devastating impact on the shares of Gilead Sciences, Inc. GILD. On Monday, Express Scripts, the nation's largest benefits pharmacy manager, disclosed that its largest plan will cover only AbbVie's newly-approved hepatitis C regimen for patients with the most popular form of the virus. It will no longer use drugs from Gilead Sciences and Johnson & Johnson for that same form of the disease.

Although there is a $681.00 price differential (Gilead Sciences $84,000 versus AbbVie's $83,319), it represents less than a 1 percent reduction.

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Beatdown For Gilead Sciences, Smaller Reaction In AbbVie

The Street punished Gilead Sciences, as shares closed down more than 14 percent at $92.90.

The issue found support at this level in pre-market trading and again off the open and rebounded to $98.07. Unfortunately, the rally fizzled and the issue made new lows for the session.

As much as a negative effect on Gilead Sciences share price, it did not having nearly as positive of an effect on shares of AbbVie. After sprinting to a new all-time high at $72.00 in pre-market trading, it was not able to reach its former all-time high of $70.76 during the regular session.

After opening at $68.04, it briefly rallied to $68.25 and reversed course and matched Friday's low ($66.84), reaching $66.83. AbbVie closed Monday at $66.97, down 1 percent.

Ratings Changes

Bank of America downgraded Gilead to Underperform and cut the price target to $87.

As of Monday, the Street high price target for Gilead Sciences resides with Bank of Montreal ($150.00) and the Street low price target can be found at Jefferies ($82.00).

For AbbVie, Argus Research had placed a price target of $85.00 and Atlantic Equities comes in with the Street low at $54.00.