Goldman Downgrades Gilead Sciences: 'We Find It Difficult To See The Stock's Multiple Expanding'

Gilead Sciences, Inc. GILD shares have come under pressure due to some pipeline misses and an aging product portfolio.

The Analyst

Goldman Sachs analyst Terrence Flynn downgraded Gilead from Neutral to Sell and lowered the price target from $70 to $60. 

The Thesis

Gilead's topline is likely to decelerate in the near term, as the Truvada/Atripla loss of exclusivity in September 2020 represents a $3-billion headwind, Flynn said in a Tuesday downgrade note.

In the long-term, the analyst expects Biktarvy to protect only half of the company's $16-billion HIV franchise from generic competition.

Flynn said he estimates a revenue CAGR of negative 5 percent for the 2019-2022 period, the lowest in his coverage universe, even as Gilead stock is trading at a slight premium to peers such as Bristol-Myers Squibb Co BMY and AbbVie Inc ABBV.

Bristol-Myers And AbbVie — though holding the same upcoming loss of exclusivity exposure as Gilead — have new product cycles and/or pipelines that offer optionality, the analyst said. 

Gilead will only have one year to market Descovy for PrEP ahead of the entry of Truvada generic in September 2020, he said. 

Gilead has a very limited mid-to-late stage pipeline, Flynn said. 

Goldman reduced its estimates for the immunology drug Filgotinib, citing competition and recent data.

"GILD currently trades at ~10x NTM P/E and barring another "Pharmasset" and/or internal pipeline success we find it difficult to see the stock's multiple expanding." 

The Price Action

Gilead shares were sliding by 2.4 percent to $65.28 at the time of publication Tuesday. 

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