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Credit Suisse analyst Alethia Young weighs in on biotech giants Gilead Sciences, Inc. (NASDAQ:GILD) and Celgene Corporation (NASDAQ:CELG) after both companies reported earnings. The analyst remains bullish on both companies in the long-term despite revised guidance.
Gilead Sciences, Inc.
Biotech giant Gilead reported first quarter earnings on April 28, leading Young to weigh in on the company’s blockbuster hepatitis C franchise. Gilead’s regimes Harvoni and Sovaldi dominate the HCV market but new competing drugs in the arena have led to concerns about Gilead’s ability to retain its stronghold in this area as Harvoni sales in the US missed estimates by $470 million. Despite the miss and new competition, Young remains confident about Gilead’s HCV franchise going forward.
As a result of new HCV competition, Young lowers her 2016 product revenue estimate from $30.8 billion down to $30 billion. In the long-term, she still models HCV as a $10 billion franchise in 2025. She explains that she has always known competition would enter into the HCV market, thus this is already modeled into her estimates, assuming a long-term market share of 80%. However, millions of people still have HCV and need to be treated, so the analyst thinks “the market persists for a long-time.” She continues, “HCV will remain a business where Gilead will price competitively in the right cases to maintain the dominant market share position they have.”
Overall Young writes, “We expect the company will develop a pipeline from here with time and continue to like the long-term story at this valuation.” She also points to the Genvoya drug for HIV, which is already launching better than her expectations.
Young reiterates an Outperform rating on Gilead with a $120 price target.
According to TipRanks, 65% of analysts covering the stock are bullish and 55% are neutral. The average 12-month price target between these analysts is $113.87, marking a 29% potential upside.
In Celgene’s first quarter earnings report, released on April 28, the biotech company lowered its 2016 guidance but kept its long-term guidance intact. Alethia Young notes that the company’s 2017 targets are in range of her current adjusted 2017 estimates and “the top-line range favorably surprised” her, noting that there is upside to these estimates if FX pans out favorably.
While lowering 2016 guidance, the company boosted 2017 Revlimid estimates from $7 billion to $8 billion, though lowered net product sales from the range of $13 billion to $14 billion down to the range of $12.7 billion to $13 billion. Looking near-term to 2016, Young notes that Pomalyst and Otezla trends “should look solid as they both continue to gain share.” She continues, “At this current level and confidence around 2016 quarters, we think accumulating shares guidance being lifted is very reasonable.”
Following Celgene’s earnings, Young calls the company a “have to own name” in 2017. The analyst reiterates an Outperform rating on the stock with a $140 price target.
According to TipRanks, 87% of analysts covering the stock are bullish while 13% are neutral. The average 12-month price target is $141.90, marking a 37% potential upside from current levels.