Gilead Sciences, Inc. (GILD) Has More Drivers At Play Than Just Crumbling HCV Segment: J.P. Morgan

Cory Kasimov is enthusiastic on GILD's CAR-T therapy Yescarta as well as M&A strategy.


Gilead Sciences, Inc. (NASDAQ:GILD) shares are on a 4% downturn after its HCV franchise tripped the biotech giant in the third quarter, which continues to be a grey cloud over investor sentiment.

J.P. Morgan analyst Cory Kasimov had questioned in the second quarter when Gilead’s HCV segment handed in a “surprisingly strong performance” whether this marked “signs of stability or the eye of the storm?” After the print is now out on the table, it is clear that this “HCV rollercoaster is not done yet,” with the analyst noting “a meaningful number of investors who await some stability with this franchise prior to getting more constructive on the name.”

“Well, GILD’s 3Q print […] gave us a pretty good answer with a miss on HCV and implications of continued weakness in 4Q,” sighs Kasimov, who comments, “Not surprisingly, this afternoon’s call was heavily focused on these trends, including further pressure on both volume and price. We expect the consternation around HCV to weigh on shares today.”

Worthy of note, the GILD team dialed back its HCV guide for the year to the bottom end of its former range. Whereas the outlook once was set for $8.5 to $9.5 billion, Gilead now expects its HCV segment to hit $8.5 to $9.0 billion for 2017. Kasimov calculates that based on the tail end of the guide, fourth quarter HCV sales are expected to drop roughly 57% year-over-year to around $1.4 billion.

However, the analyst continues to back this biotech giant, as its HCV franchise is not the only iron in the fire here: “That said, the HIV franchise is doing quite well and should perform even better with the approval of B/F/TAF in early 18. Moreover, the recent approval and pending launch of Yescarta and management’s stated focus on continued business development offer a couple sources of optionality.”

Additionally, “Management acknowledged that M&A is going to be an ongoing activity, and the company is constantly in search of opportunities to bring in new revenues and technologies,” contends Kasimov, who furthermore notes Yescarta dosing could kickstart as early as within two weeks’ time.

As such, the analyst maintains an Overweight rating on GILD stock with an $85 price target, which implies a 12% increase from current levels. (To watch Kasimov’s track record, click here)

Wall Street is cautiously optimistic on this drug maker, with TipRanks analytics exhibiting GILD as a Buy. Based on 16 analysts polled by TipRanks in the last 3 months, 9 rate a Buy on Gilead stock while 7 maintain a Hold. The 12-month average price target stands at $88.55, marking a nearly 14% upside from where the stock is currently trading.