Piper Jaffray Weighs in on Gilead Sciences, Inc. (GILD) Following Two Phase 3 Studies Results Evaluating Momelotinib for Patients With Myelofibrosis

Yesterday evening, Gilead Sciences, Inc. (NASDAQ:GILD) announced top-line results from both of its Phase 3 trials of momelotinib, an examinational inhibitor of Janus kinase (JAK) compared to ruxolitinib or best alternative therapy (BAT) in patients with myelofibrosis (MF). The verdict? GILD’s pipeline drug ultimately turned up “inferior” to Incyte Corporation’s (INCY) ruxolitinib, results that to Piper Jaffray analyst Joshua Schimmer may be dismal, but are not at all surprising.

Nonetheless, the analyst continues to see the company as a “top large cap deep value pick” and reiterates an Overweight rating on shares of GILD with a $102 price target, which represents just under a 35% increase from current levels.

From the analyst’s perspective, this failure further demonstrates to him that the biotech firm’s weak R&D segment’s string of stumbling blocks will likely and hopefully impel GILD to a much-needed overhaul, complete with “pipeline reset and aggressive M&A transaction(s). Which is a good thing because from what we can tell, no investors give them credit for the non-HIV/HCV/filgotinib pipeline.”

You might be wondering how it is possible for Schimmer to criticize GILD’s science amid its failing HCV efforts, and yet maintain such a positive forecast for the stock.

Ultimately, “Simply, the 6x forward P/E, in our view, implies steady decline of HCV franchise, undervalues the HIV franchise, and implies no value-creation efforts from the company. And while we see a broken R&D engine, the reality is that GILD’s ‘true’ pipeline is the entire biotech industry, and the more that its internal programs fail, the more it will be forced to in-license and acquire (either one large deal, or a series of CELG-like string-of-pearls quality partnerships and acquisitions). The beauty of the biotech industry is that if you can’t build it, you can buy it. We just wish GILD would recognize this sooner than later, but it seems quite inevitable to us; we expect management will fix this,” Schimmer contends.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Joshua Schimmer is ranked #3,956 out of 4,226 analysts. Schimmer has a 43% success rate and faces a loss of 3.4% in his annual returns. When recommending GILD, Schimmer forfeits 3.0% in average profits on the stock.

TipRanks analytics demonstrate GILD as a Buy. Out of 17 analysts polled by TipRanks, 12 are bullish on Gilead stock and 5 remain sidelined. With a return potential of nearly 30%, the stock’s consensus target price stands at $98.79.screen-shot-11-17-16-at-03-22-pm

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