Needham Bullish on Two Biotech Giants: Gilead Sciences, Inc. (GILD) and Intercept Pharmaceuticals Inc (ICPT)

Top-ranked analyst Alan Carr weighed in on two biotech giants this week, Gilead Sciences, Inc. (NASDAQ:GILD) and Intercept Pharmaceuticals Inc. (NASDAQ:ICPT). The analyst reflects on a successful earnings report from Gilead and less-than impressive trial results from Intercept.

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Gilead Sciences, Inc.

Gilead reported 3Q15 earnings data this week, triggering analyst Alan Carr of Needham & Co to weigh in on the stock. Carr reiterated a Buy rating with a 12-month price target of $125.

The biopharmaceutical company surpassed Carr’s expectations in terms of sales and revenues. The company posted product sales of $8.21 billion, a 27% year-over-year increase, and above his estimates of $7.89 billion. The company also posted non-GAAP EPS of $3.22, above the analyst’s $2.94 estimate and above the consensus estimate of $2.87. Gilead raised its annual 2015 sales guidance to $30-31 billion, up from $29-30 billion.

Gilead markets a number of antiviral products, including two blockbuster Hepatitis C Virus (HCV) franchise drugs, Harvoni and Sovaldi. Global HCV franchise sales declined Q/Q to $4.8 billion (from $4.9 billion). Carr reported, “Mgmt believes U.S. Harvoni scripts have now stabilized and guided for consistent levels through 2016, w/assumption that U.S. payers will gradually loosen restrictions.” He further added, “Our 4Q15 WW Sovaldi and Harvoni estimates are $1.40 billion (was $1.04 billion) and $3.13 billion (was $3.40 billion). We believe Mgmt 2015 product sales guidance is conservative.”

The analyst noted near-term growth drivers for Gilead, including the expansion in the global HCV antiviral market with Harvoni along with the company’s pipeline drug that treats all types of hepatitis C. Furthermore, the analyst pointed to the continuing growth of HIV patient population and issuance of treatment guidelines on early initiation of antiviral treatment.

Carr has rated Gilead 16 times, realizing an 88% success rate recommending the company and a +48.6% average return per Gilead rating. According to TipRanks, out of 9 analysts who have rated Gilead within the last three months, 7 are bullish on the stock while 2 are waiting on the side lines; none of the analysts are bearish on the stock.  The average 12-month price target for Gilead is $131.29, marking a potential upside of 21.42%.

Intercept Pharmaceuticals, Inc.

Intercept announced results this week from its Phase 2 trial of Obeticholic Acid (OCA) in Japanese patients with nonalcoholic steatohepatitis (NASH), a liver disease. The 72-week trial involving 200 patients evaluated 3 doses of OCA against placebo in Japanese NASH patients. Following the results of the trial, Alan Carr from Needham weighed in on the stock, reiterating a Buy rating on the stock with price target of $500. While the trial missed its primary endpoint, which was to show dose-dependent improvement in NAFLD Activity Score (NAS), there was no worsening of the liver disease.

One trend is readily apparent and that is the highest dose tested (40 mg) did have a “statistically significant impact relative to placebo (p=0.0496).” Also reportedly, there were other trends observed in favor of OCA with respect to proportion of patients who experienced improvements.

In the report, Carr also mentions the FLINT trial, which was done at US sites. In this context, Carr says the efficacy of the Japanese trial may not align with the FLINT trial because of differences in trial size and patient characteristics.

Carr concludes, “Our expectations for a positive outcome from Phase 3 REGENERATE trial are unchanged, given the substantial similarities to the Phase 2 FLINT trial.” The REGENERATE Phase 3 trial was announced by the company in May 2015. This trial of OCA will be performed on patients with NASH with liver fibrosis.

Alan Carr is a top analyst with a 59% overall success rate recommending stocks with a +25.8% average return per rating. According to TipRanks, out of 6 analysts who have recently rated Intercept’s stock, 4 have rated it as Buy, and 2 have rated it as Sell; all 6 analysts seem to have a decisive view on the stock with none of them waiting on the sidelines. The average consensus price target for the stock is $345.5, an upside of 110.5% over current levels.


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