Analysts are reiterating buys on Gilead Sciences, Inc. (NASDAQ:GILD) and Amgen, Inc. (NASDAQ:AMGN), but are not equally bullish on the two stocks. Though J.P. Morgan for now sees value in rooting for Gilead long-term, he reigns in his price target following an HCV setback with lower than anticipated guidance issued for the first quarter of 2017. Conversely, Oppenheimer recognizes glittering prospects ahead for Amgen on back of the firm receiving FDA approval for its drug, Parsabiv. Let’s dive in:
Gilead’s Elephant in the Room: Its HCV Franchise
Gilead shares are dipping nearly 7% today on the heels of a rocky fourth-quarter print released yesterday evening indicating that it might be time for the biotech giant to reevaluate its HCV franchise. J.P. Morgan analyst Cory Kasimov for one is disappointed, taking a swipe at Gilead that its “HCV guidance comes in lower than already depressed expectations.”
However, the analyst still sees compelling valuation in Gilead shares despite his exasperation with the HCV miss. As such, the analyst reiterates an Overweight rating on shares of GILD while cutting the price target from $96 to $82, which represents a just under 20% increase from current levels.
Ultimately, “GILD’s 4Q results followed the trend of the previous several quarters with continued HCV declines, but newly issued 2017 guidance took it to another level. We believe investors expected guidance to be light….just not necessarily this light. The question now is whether this cut to expectations shifts the narrative on the story. We suspect this will further intensify investor desire for M&A to drive growth in both the near and long term. That said, even with our new lower HCV expectations (we model total HCV sales of $8.3B in 2017 down from $10.8B prvsly) GILD still looks cheap. Using the post-market ~$69/shr, GILD is trading at ~9x our new 2017e EPS […] with an ~11% FCF yield (and a dividend yield of <3%) and the optionality provided by the co’s cash position intact. As such, we are maintaining our OW rating for now, though acknowledge that our frustration on the lack of a clearly articulated strategy continues to grow,” Kasimov surmises.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Cory Kasimov is ranked #4,285 out of 4,381 analysts. Kasimov has a 33% success rate and loses 9.8% in his yearly returns. When suggesting GILD, Kasimov forfeits 12.9% in average profits on the stock.
TipRanks analytics indicate GILD as a Buy. Based on 13 analysts polled by TipRanks in the last 3 months, 9 rate a Buy on GILD stock while 4 maintain a Hold. The 12-month average price target stands at $85.50, marking a nearly 17% upside from where the stock is currently trading.
Amgen’s Chance of Upside Looks Promising
Oppenheimer analyst Leah R. Cann sees Amgen in solid standing following the FDA’s green light for Parsabiv, a drug designed to treat secondary hyperparathyroidism (HPT) in adult patients with chronic kidney disease (CKD) on hemodialysis. In reaction, the analyst highlights the stock’s upside potential in her research report and reiterates an Outperform rating on AMGN with a $175 price target, which represents a close to 5% increase from where the shares last closed.
Cann opines, “Amgen reported that Parsabiv is the first therapy approved for this condition in 12 years and the only calcimimetic that can be administered intravenously by the dialysis health care team three times a week at the end of the hemodialysis session. With today’s approval of Parsabiv, there may be upside to our current expectations for Amgen’s PTH franchise. Based on data previously presented comparing Parsabiv to Sensipar, the case can be made that Parsabiv will be able to offset anticipated declining Sensipar sales.”
Looking ahead, the analyst sees Parsabiv’s key rival, Sensipar, at risk for a downward sales spiral, and commends AMGN’s drug as “superior.” Overall, “Sensipar is in its 14th year of launch and based on our analysis will be off-patent in 2018. Sensipar has high and stable market penetration in these settings; however, we anticipate its sales will decline meaningfully starting in 2018,” Cann contends, expecting Sensipar sales to take a dip from $1.4 billion in 2015 down to $794.6 million by 2020, accounting for 3.3% of sales.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, one-star analyst Leah R. Cann is ranked #3,575 out of 4,381 analysts. Cann has a 21% success rate and risks a loss of 4.7% in her annual returns. However, when rating AMGN, Cann gains 6.8% in average profits on the stock.
TipRanks analytics show AMGN as a Buy. Out of 13 analysts polled by TipRanks in the last 3 months, 9 are bullish on Amgen stock and 4 remain sidelined. With a return potential of nearly 12%, the stock’s consensus target price stands at $186.45.