Needham analyst Alan Carr is out with a mixed research report today on biotech players Gilead Sciences, Inc. (NASDAQ:GILD) and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). When considering upcoming events for the new year, though the analyst is wary on GILD’s revenue prospects, he conversely applauds ACAD’s M&A potential.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Alan Carr is ranked #356 out of 4,365 analysts. Carr has a 45% success rate and gains 9.4% in his annual returns. When recommending GILD, Carr garners 39.3% in average profits on the stock. When suggesting ACAD, Carr yields 26.5%.
Let’s take a closer look:
Be Cautious on Gilead Stock
From Carr’s eyes, Gilead’s HCV franchise is climbing a steep uphill battle in terms of competition as well as through a pricing lens, even as it remains far ahead in the race. Anticipating declining HCV revenues in the biotech giant’s future, the analyst remains sidelined, reiterating a Hold rating on GILD without listing a price target.
Carr explains, “Although Gilead is a clear leader in HCV, we expect increased competitive and pricing pressure in 2017 and 2018 as other once-daily single table regimens reach the market. We expect the company to continue to dominate the HIV space, particularly with the introduction of TAF/FTC/BIC,” adding he predicts these HIV drugs to leap to the “forefront” of available therapies.
The giant should have Phase 3 top-line data readouts sometime by the second quarter of 2017, with subsequent NDA coupled with MAA submissions to follow in the third quarter.
However, Carr underscores, “Although Gilead retains >85% of current HCV market share, we expect HCV revenues to continue to diminish as fewer patients are initiating therapy and more competition enters the market. Additionally, a greater proportion of treatment-naive patients are receiving 8-week therapy, in contrast to a higher percentage of patients treated with 12 and 24-week courses in the past.”
Moving forward, “We have concerns over revenue growth and are therefore cautious towards the stock. Evidence of substantial growth derived from M&A or internal pipeline may change our view. We believe liver disease likely presents the best opportunity for the company in the long-term,” Carr contends, highlighting the giant’s three nonalcoholic steatohepatitis (NASH) drugs in Phase 2 trials as potential gamechangers in the future: ASK-1 inhibitor Selonsertib, ACC inhibitor GS-0976, and FXR agonist GS-9674.
TipRanks analytics indicate GILD as a Buy. Based on 15 analysts polled by TipRanks in the last 3 months, 11 rate a Buy on GILD stock while 4 maintain a Hold. The 12-month average price target stands at $94.83, marking a nearly 34% upside from where the stock is currently trading.
ACADIA is an Attractive Target for Merger & Acquisition Deal
When it comes to ACADIA’s valuation, Carr believes investors are underestimating the biotech firm’s opportunities lying ahead, particularly considering its strong asset, psychosis drug Nuplazid. Therefore, the analyst reiterates a Buy rating on shares of ACAD with a $49 price target, which represents a 57% increase from where the stock is currently trading.
In its third quarter of 2016, ACADIA hit $5.3 million in domestic Nuplazid sales. When modeling for the fourth quarter as well as for 2016 sales, the analyst calls for fourth quarter sales to reach $9.0 million and for 2016 sales to circle $14.4 million, highlighting positive Phase 2 trial results of the drug when tested in the indication of Alzheimer’s Disease Psychosis (ADP) back in December.
Additionally, ACAD is investigating Nuplazid’s potential as an adjunct treatment for schizophrenic patients, which is in the midst of a Phase 3 ENHANCE-1 study. Results could be out as soon as the second half of 2018 or by 2019.
Carr speculates, “We believe peak sales potential for Nuplazid in Parkinson’s Disease Psychosis is less than $1B, but given indications of activity in schizophrenia, PDP, and now ADP, we believe peak sales potential for the drug overall may be over $2B.”
Overall, “We are encouraged by the outcome of the Phase 2 trial in Alzheimer’s Disease Psychosis. Although there are only sales-based milestones in 2017, we believe the stock is fundamentally undervalued given the likelihood of Nuplazid label expansion to several other indications as early as 2020. In our view, the company is an attractive M&A target. Acadia ended 3Q16 with $588.9M in cash,” Carr surmises.
TipRanks analytics exhibit ACAD as a Strong Buy. Out of 7 analysts polled by TipRanks in the last 3 months, 6 are bullish on ACADIA stock and 1 remains sidelined. With a return potential of nearly 24%, the stock’s consensus target price stands at $38.75.You can learn how to set up your own top-notch biotech portfolio here.