Analyst Brian Skorney from Baird discussed Gilead Sciences, Inc. (NASDAQ:GILD) and Celgene Corporation (NASDAQ:CELG) ahead of their second-quarter earnings reports. Let’s take a closer look:

Gilead Sciences, Inc.

Skorney, in his second quarter earnings report preview for Gilead Sciences, states that he believes that its shares are still undervalued as a whole, however, the analyst thinks there is more downside risks this quarter than upside.

Gilead’s patient starts have been in a steady decline despite an increase in NRx last quarter. The analyst also doesn’t believe that Gilead will hit estimated Hep C sales of $4.07 billion with his estimate at $3.87 billion.

A big focus for investors will be on durability and “the retail channel is indicating” that the increase of patient starts due to loosened pay restrictions will not be permanent. Skorney expects franchise sustainability and efforts to stabilize patient inflow to pickup with the return of Kevin Young, a long-time commercial leader.

Skorney then touches on how Gilead’s HIV franchise continues to exceed expectations. The company’s TAF-based regiments, Genvoya, Descovy and Odefsey, are “converting patients on legacy Gilead products and also capturing meaningful new market share.”

The analyst expects Gilead’s revenue guidance for 2016 to remain the same. He maintained his Outperform rating with a price target of $135, marking a 56% increase from current levels.

According to TipRanks, the analyst has a yearly average return of 3.6% and a 53% success rate. The analyst has a 10.8% average return when recommending Gilead, and is ranked #873 out of 4,081 analysts.

TipRanks shows that out of the 13 analysts who rated Gilead in the last 3 months, 62% gave a Buy rating and 38% gave a Hold rating. The average 12-month price target for the stock is $114.40, marking a 32% upside from current levels. 

Celgene Corporation

Skorney is expecting to see “in-line performance” this quarter for Celgene Corporation. He expects top-line YoY growth to be close to 17% with bottom line growth increasing as much as 7% YoY.

Following last year’s label expansions, the analyst is expecting strong growth in Revlimid sales, especially outside of the U.S. “where the drug remains in the early ramp stages in newly diagnoses multiple myeloma patients.” Skorney anticipates sales of $1.66, which would meet expectations. With regards to Pomalyst, a drug only approved for third line or higher multiple myeloma patients, the analyst expects sales of $294 million, slightly below expectations of $302 millions.

Otezla, a drug for psoriasis and psoriatic arthritics, has been a key contributor to Celgene since its launch in 2014. The analyst is expecting to see script trends this quarter show slowing growth. He thinks that “Otezla may be reaching a period of stable growth that consensus estimates may not be factoring in.” Skorney thinks worldwide sales will be $224 million, $14 million below consensus expectations. He is also predicting GAAP EPS to be at $1.01, just below expectations of $1.05.

Skorney maintained his Outperform rating with a price target of $162, marking a 51% increase from current levels.
According to TipRanks, the analyst has a yearly average return of 3.6% and a 53% success rate. The analyst has a 3.8% average loss when recommending Celgene, and is ranked #873 out of 4,081 analysts.

TipRanks shows that out of the 19 analysts who rated Celgene in the last 3 months, 84% gave a Buy rating and 16% gave a Hold rating. The average 12-month price target for the stock is $142.42, marking a 32% upside from current levels.