Gilead Falls On Uninspiring Q3 Print: 3 Analyst Takes

Gilead Sciences, Inc. GILD reported after the market close Thursday with results that left investors uninspired. 

The Analysts

Morgan Stanley analyst Matthew Harrison maintained an Equal-weight rating on Gilead with a $75 price target.

Baird analyst Brian Skorney maintained a Neutral rating and $76 price target.

Raymond James analyst Steven Seedhouse maintained a Strong Buy ratingand lowered the price target from $85 to $81.

Morgan Stanley Watching Gilead's Next Moves

Notwithstanding Gilead's in-line revenues and a slight bottom-line beat, investors are likely to be disappointed due to some growth products such as Biktarvy, its HIV-1 triplet, and the CAR T therapy Yescarta missing expectations, Harrison said in a Friday note.

The analyst named the following takeaways from the call:

• A reiteration that the U.S. filgotinib filing is on track for year-end 2019, with a data readout for filgotinib in ulcerative colitis due in 2020. 
• Gilead suggesting conservative expectations for the filgotinib label.
• Commencement of a study of Descovy in cis-gender woman for label expansion.
• An increase in patients taking Truvada for PrEP, from 213,000 in the second quarter to 224,000 in the third quarter.
• Positive feedback for Descovy.
• ATLAS NASH study on track for a year-end 2019 readout.
• Gilead's decision not to bring forward GS-9131, but focus on GS-6207 for highly refractory HIV patients. 

"Thus, near-term performance in GILD will continue to be based off investor views of mgt.'s pipeline development strategy particularly in oncology," Harrison said. 

Investors are likely to focus on pipeline developments via M&A or partnerships, according to Morgan Stanley. 

Baird Sees No Reason For Stock Breakout 

Biktarvy sales came in below expectations but continue to impress, Skorney said in a Thursday note. 

Overall, Gilead's HIV franchise fared in-line with Baird's expectations, the analyst said. 

HCV product sales dipped sequentially but came ahead of expectations, he said.

The company attributed the sequential drop to an adverse impact from one-time clawback provisions in the EU, Skorney said. 

Phase 2b ATLAS trial data from a number of different combination therapies in NASH, due in the fourth quarter; and data from a Phase 2 trial of KTE-X19 in patients with MCL due for presentation at ASH in December are the key pipeline events to keep an eye on, the analyst said.

Baird said it believes Gilead "remains stuck in maturity." The firm views the shares as good as a cash proxy, provided one is bearish on the sector.

The firm does not see any reason for the stock to break out to the upside or downside, Skorney said. 

Raymond James: ‘Our Investment Thesis Is Admittedly Drifting'

Gilead may have been lucky to report in-line third-quarter results, Seedhouse said in a Thursday note. 

The analyst sees doubts surrounding the company's NASH program, and said he has not gained confidence that NASH was a top priority following a conversation with the company.

"Frankly, given we think ATLAS data are going to be negative, this strikes us as an indication Gilead will be dialing back investment in near-term and may wait to see how things play out for ICPT in the marketplace." 

Raymond James doesn't think Biktarvy + PrEP + Yescarta are enough anymore to drive growth in the face of continued pressure on HCV and other legacy product sales as patents expire, Seedhouse said. 

Filgotinib and M&A will need to be the main growth drivers going forward, the analyst said. 

Although the firm believes the base business is unlikely to be a major growth business, it thinks it is still "stable and huge and undervalued," according to Raymond James. 

Price Action

Gilead shares were slipping 4.55% to $63 at the time of publication. 

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