Merrill Lynch Weighs in on Biotech Giants Gilead Sciences, Inc. (GILD) and Pfizer Inc. (PFE)

Merrill Lynch dives into the biotech world as analysts explore positive catalysts for giants Gilead Sciences, Inc. (NASDAQ:GILD) and Pfizer Inc. (NYSE:PFE). One analyst discusses what positive endoscopy results in Crohn’s disease might mean for GILD’s promising pipeline, while another stands by Pfizer’s decision to abide as one company rather than splitting into two businesses. Let’s take a closer look:

Gilead Sciences, Inc.

Gilead’s partner Galapagos announced positive 10-week endoscopy results of the Phase 2 FITZROY study evaluating filgotinib, a selective JAK1 inhibitor for the treatment of moderate to severe Crohn’s disease.

These results are out ahead October’s United European Gastroenterology Week, and revealed 25% of patients taking filgotinib indicated at least 50% of reduction in the SES-CD score, compared to 13.6% of patients taking the placebo.

In light of the “encouraging” level of response in the first double-blind, placebo-controlled endoscopy study, Merrill Lynch analyst Ying Huang believes the endoscopic data in FITZRPY “set a high bar.”

Huang notes, “We anticipate the detailed presentations at UEGW for FITZROY and CELG’s endoscopy study of GED-0301, in which a proportion of patients showed >25% reduction in SESCD score.”

“Filgotinib was generally safe and well tolerated. A vast majority of the SAEs were related to worsening of CD but not filgotinib. A favorable lipid profile with an increase in HDL but no change in LDL compared to placebo was observed. Note that both HDL and LDL increased in the baricitinib trials,” the analyst asserts.

Huang reiterates a Neutral rating on shares of GILD with a $100 price target, which represents just under a 27% increase from where the stock is currently trading.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Ying Huang is ranked #152 out of 4,183 analysts. Huang has a 70% success rate and garners 18.9% in his annual returns. When recommending GILD, Huang loses 4.2% in average profits on the stock.

TipRanks analytics exhibit GILD as a Buy. Based on 17 analysts polled in the last 3 months, 9 rate a Buy on GILD, while 8 maintain a Hold. The 12-month price target stands at $103.46, marking a nearly 31% upside from where the shares last closed.

Pfizer Inc. 

Yesterday, Pfizer announced it has decided not to split into Innovative and Essential Health businesses, opting to instead remain as one company entity, a choice which Merrill Lynch analyst Colin Bristow fully supports as “the right decision.”

As such, Bristow reiterates a Buy rating on PFE with a price target of $40, which represents an 18% increase from where the shares last closed.

Investors have had all eyes awaiting this decision, although as time passed and management indicated no present “trapped value,” the end result is not a surprising one to the analyst.

Bristow believed Pfizer would choose to not split based on previous analysis and asserts, “In line with PFE’s decision, we see no trapped value at this time and actually believe a split would have resulted in downside.”

Moreover, Bristow acknowledges, “Of course, PFE could split and see this value realized as a standalone entity but the financial cushion provided by EH could be useful until key pipeline stories are de-risked.”

From the analyst’s perspective, PFE’s “decision ultimately removes a major potential catalyst for PFE between now and year end, we see little near-term event-driven upside for the stock. However, we remain bullish from a medium term perspective based on attractive valuation, solid dividend yield, pipeline optionality (bolstered by MDVN’s PARP) and potential future split action.”

According to TipRanks, three-star analyst Colin Bristow is ranked #1,869 out of 4,183 analysts. Bristow has a 67% success rate and yields 3.7% in his yearly returns. When recommending PFE, Bristow gains 9.7% in average profits on the stock.

TipRanks analytics demonstrate PFE as a Strong Buy. Based on 12 analysts polled in the last 3 months, 9 rate a Buy on PFE, while 3 maintain a Hold. The consensus price target stands at $41, which represents a 21% upside from where the stock is currently trading.screen-shot-09-27-16-at-10-25-pm

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