Gilead's Q1 Fails To Impress, But Strength Of Pipeline Not Reflected In Current Share Price

BMO Capital Markets' M. Ian Somaiya maintained a Market Perform rating on Gilead Sciences, Inc. (NASDAQ: GILD) with a price target boosted from $75 to $76 after the company reported its first quarter results.

Gilead's reported revenues of $6.5 billion fell short of the $6.66 billion Somaiya was expecting as the company's strength from HIV therapies ($3.27 billion in the quarter) wasn't enough to offset deterioration in HCV therapies in which total sales of $2.58 billion fell short of the $2.69 billion he was expecting.

Divergence And Pipeline Strength

According to Somaiya, Gilead's two major franchises (HIV and HCV) continued to diverge in the quarter.

The HCV franchise suffered fewer new treatment starts, price erosion in the European Union and an overall loss of share. On the other hand, HIV benefited from a rapid conversion to TAF-based combinators.

Looking forward, the analyst is expecting Phase 3 data from bictegravir (due in the second quarter of 2017) securing a "vast majority" of the HIV franchise through 2033.

Other updates include the expansion of filgotinib program despite regulatory delays for baricitinib and data from NASH portfolio drugs GS-0976 and GS-9674 could "start to provide visibility" on future growth drivers.

In fact, the analyst believes Gilead's stock assumes "little to no value" for its NASH portfolio and a combination of assets in portfolios could create $3 billion to $5 billion in vale and play a roll in offsetting declining HCV sales.

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