Healthcare analysts adjust their estimates for Gilead Sciences, Inc. (NASDAQ:GILD) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) ahead of earnings and a planned acquisition, respectively. Both are bullish on the two pharma giants, expecting long term gains in spite of near-term challenges and uncertainties.

Gilead Sciences, Inc.

Baird analyst Brian Skorney explained what he expects from Gilead’s upcoming 1Q:16 earnings. First, the analyst provides his Hep C drug sales estimates for Q1:16, remaining “roughly” flat at $2.32 billion compared to last quarter’s $2.37 billion. This slightly lower estimate is primarily due to a 6% decline in Harvoni U. S. prescriptions in the last quarter. The analyst also credits the recently renewed Veteran Affairs budget as a factor of flat growth for the quarter. He explains “We believe a VA contribution is likely to materialize this quarter that isn’t accounted for in prescription data, bringing U.S. Harvoni sales close to parity with last quarter.”

Most notably, analyst believes RoW sales (outside of the U.S. and Europe), mainly from Japan, will contribute to a “light” EPS for the quarter. Despite a strong launch of the company’s Hep C drugs in 1Q16, the analyst attributes “budget limitations and decelerating new starts” to his predicted 50% decline Japanese Hep C drug sales. As a result, Skorneys expects RoW sales to amount to $1 billion in Q1, down from $1.68 billion last quarter.

Despite an expected flat quarter, the analyst provides hopeful sentiment going forward, driven by many variables. Regarding U.S. prescriptions, the analyst believes this quarter’s slight decline will not last. He explains, “Recent trends…have shown promise for an uptick in sales in 2Q,” and highlights March prescriptions, which “popped up to levels not seen since last spring.” Skorney also points to “diminishing competitive concerns” regarding the launch of Merck’s Zepatier, which has been “uninspiring.”

Overall, the analyst expresses confidence in Gilead’s Hep C profile and justifies flat growth. He explains “This quarter’s Hep C scripts are indicative of Gilead’s continued stronghold in Hep C, and leveling off of the Hep C market in the U.S.” On the upside for 1Q16 are projected Hep C sales increases in Europe “due to improved access and reimbursement in key countries” such as the UK. Skorney also highlights Genvoya, the company’s HIV drug, prescription success. He states, “We are projecting sales of $90M versus consensus estimates of $70M for the drug’s first full quarter on the market.”

The analyst reiterates an Outperform rating on the stock with a $135 price target. According to the analyst, “strong HIV sales and a recent uptick in U.S. Hep C Rx trends will maintain the stock’s recent strength.”

According to TipRanks, Brian Skorney has a 46% success rate recommending stocks with an average return of 0.3% per recommendation. Out of the 19 analysts who have rated the company in the last 3 months, 14 gave a Buy rating while 5 remain neutral. The average 12-month price target for the stock is $113.67, marking a 17% upside from where shares last closed.

Teva Pharmaceutical Industries Ltd (ADR)

Sumant Kulkarni of Merrill Lynch provided estimate updates on Teva regarding its pending purchase of Allergan’s Actavis generics business in the wake of the merger fallout between Allergan and Pfizer. Last week, Allergan and Pfizer decided to terminate their planned merger due to new U.S. Treasury regulations limiting tax inversions.  Despite the recent AGN-PFE fallout, Kulkarni has “no reason to believe [the TEVA] deal will not close” though notes it is subject to the approval of the U.S. Federal Trade commission, which could occur as late as June 2016.

Although the analyst provides hopeful sentiment on the likelihood of approval, he believes “a further slippage in timing (the deal was originally slated to close in 1Q) could create further anxiety for investors in an environment that has been especially challenging for Spec Pharma stocks.” Still, Teva is his firm’s top Specialty Pharma Pick for 2016. He explains, “The company remains well-positioned to drive shareholder value via its industry-leading generics business that will be strengthened by the addition of Actavis generics.” He also cites that Actavis is “underappreciated” by investors.

As a result of uncertainty regarding the timing of the deal, the analyst slightly decreases his 2016 revenue and EPS estimates for the company to $22.2 billion/$5.18 from previous estimates of $23.7 billion/$5.40. Kulkarni will be watching for updates on “Teva’s outlook for 2016 as a combined entity” once the deal closes.

The analyst reiterates a Buy rating on the stock with an $82 price target.

According to TipRanks, Sumant Kulkarni has a 37% success rate recommending stocks with an average loss of (9%) per recommendation. Out of the 13 analysts who have rated Teva in the last 3 months, 10 gave a Buy rating while 3 remain on the sidelines. The average 12-month price target for the stock is $74.23, marking a 35% upside from where shares last closed.