Gilead Analysts Downplay Q2 Miss Amid Remdesivir's COVID-19 Opportunity

Gilead Sciences, Inc. GILD reported second-quarter revenues and earnings that trailed expectations.

The Gilead Analysts

Morgan Stanley analyst Matthew Harrison maintained an Equal-Weight rating and $79 price target for Gilead.

Raymond James analyst Steven Seedhouse maintained a Market Perform rating.

SVB Leerink analyst Geoffrey Porges has an Outperform rating and $95 price target.

Needham analyst Alan Carr has a Hold rating on Gilead.

Cantor Fitzgerald analyst Alethia Young reiterated an Overweight rating and $86 price target.

Despite Volatility, Gilead's Q2 Was Solid: Gilead's sales missed estimates by 3% due to destocking and slower HCV starts, reflecting temporary COVID-19 disruptions, Harrison said in a note. Among the products, Yescarta, Symtuza, Viread and Letairis beat consensus estimates, while Biktarvy, Descovy and Epclusa missed expectations.

Gilead raised its full-year revenue and non-GAAP EPS guidance.

Management said on the earnings call it expects to manufacture more than 2 million treatment courses of remdesivir by year's end, with about 1 million to 1.5 million doses expected to be sold. The analyst estimates 1 million doses will be sold in 2020.

The company also noted that filgotinib will not have an advisory committee meeting.

"Despite some volatility, we see the quarter as solid," Morgan Stanley said.

Notwithstanding visibility into near-term remdesivir revenues, the longer-term impact is unclear. The upcoming filgotinib PDUFA and its launch, as well as normalized remdesivir demand by the fourth quarter, are key near-term drivers of Gilead.

See Also: Credit Suisse Upgrades Gilead On Remdesivir Commercial Opportunity

Raymond James Lacks Confidence In Remdesivir: Given remdesivir is over $3 billion of 2020 revenue guidance, based on 1 million to 1.5 million treatment courses at $2,500 per course, Gilead is uniquely tied to COVID-19, Seedhouse said.

The base HIV and HCV business is under considerable pressure and interruption from COVID leading to the second quarter miss, the analyst said. Recovery from the pandemic, though realigning the base business, would encumber remdesivir.

In the long run, oncology, filgotinib, and seemingly capsid inhibitor in HIV will be key drivers.

"But in the near term, we think the stock still trades on COVID and our assessment of the 1-1.5M course guidance for such a seemingly weak drug implies a disappointment could be in the cards in 4Q particularly if EU use doesn't dramatically increase use," the firm said in the note.

The firm remains sidelined due to its lack of confidence in remdesivir.

Remdesivir Behind The Guidance Revision: The large second-quarter bottom-lime miss came from both the top-line disappointments across multiple franchises due to COVID and generic entry, as well as increased R&D and SG&A expenses associated with remdesivir and litigation accruals, Porges said.

HCV portfolio sales fell 42% year-over-year and the HIV portfolio remained largely flat, driving product sales down by 10%, the analyst said. The guidance was raised primarily on the remdesivir opportunity.

Oncology, Gilead's Focus Area Now And Going Forward: There are signs of recovery in Europe and parts of Asia, and a gradual recovery is likely in the U.S. in the third quarter, Carr said, citing Gilead's management.

Most remdesivir manufactured in 2020 will be sold this year, given the pandemic trends. Key second-half events include filgotinib regulatory decision in rheumatoid arthritis in the U.S., Europe and Japan, with the management shooting for a virtual launch.

Oncology, according to the analyst, is a high priority on the business development front for the company now and going forward.

Cantor Is Positive: Cantor believes underlying base business fundamentals remain solid and will rebound over the second half of 2020 and the first half of 2021.

The company has new HIV innovations that are likely to provide a longer patent protection period beyond Biktarvy. That said, remdesivir can help Gilead to attain an attractive EPS growth profile in the interim, the analyst said.

"We remain positive on GILD here as we think the company is hitting its stride on the pipeline and the base business has strong underlying trends," Young wrote in the note.

GILD Price Action: Gilead shares were slipping 5% to $68.73.