Morgan Stanley Weighs in on Gilead Sciences, Inc. (GILD) Following Colorado’s Hepatitis C Policy Change

The state of Colorado has just announced it will be loosening restrictions for Medicaid Hepatitis C patients, which could translate to an increase in revenue for Gilead Sciences, Inc. (NASDAQ:GILD). From Morgan Stanley analyst Matthew Harrison‘s perspective, the revised guidelines indicate potential to garner $200 million for the biotech giant.

In light of the new guidelines that will go into effect starting October 1st,  the analyst sees “a continuation of a positive trend,” with Colorado following in the footsteps of other states across the nation who have loosened, albeit not removed entirely Hepatitis C treatment restrictions.

Colorado will now allow for treatment of patients with fibrosis scores between 2 to 4, an increase from the previous 3 to 4, thanks to unanimous pressure from the ACLU Colorado threatening to take legal action, joined by the Denver Health Medical System, and topped by a review issued directly by the state drug review board.

The change in policy means women who plan pregnancy in the upcoming year, regardless of fibrosis score, will have new access to coverage, along with more lax restrictions for those who have prior alcohol or illegal drug use in a span of six months.

“Colorado has ~14.4k patients with Hepatitis C (HCV) and ~70% of these have a fibrosis score of F2 or greater. The state estimates in the next year ~20% of Medicaid patients with HCV will seek treatment and cost $47.5M,” the analyst concludes, anticipating that Colorado’s removal of fibrosis score restrictions could result favorably for the biotech firm and its now-expanded prospective paying patient pool.

However, while certainly welcome news, Harrison remains cautiously optimistic as he deems this will most likely bring about a “minimal direct impact to GILD,” given that all patients in Colorado would need to be treated for the firm to attain the full $200 million in additional revenue. As such, he reiterates an Equal Weight rating on GILD with a price target of $100, which represents a 28% increase from where the shares last closed.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Matthew Harrison is ranked #1,251 out of 4,147 analysts. Harrison has a 53% success rate and yields 2.8% in his yearly returns. However, when recommending GILD, Harrison loses 5.7% in average profits on the stock.

TipRanks analytics demonstrate GILD as a Buy. Based on 16 analysts polled in the last 3 months, 9 rate a Buy on GILD, while 7 maintain a Hold. The consensus price target stands at $106.63, marking a nearly 37% upside from where the stock is currently trading.Screen Shot 09-07-16 at 03.13 PM


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