Gilead Analysts React To Failed NASH Trial: Citigroup, Wells Fargo Downgrade Biotech

One of the three widely awaited clinical trial readouts from Gilead Sciences, Inc. (NASDAQ: GILD) turned out to be a disappointment, sending its shares down sharply Tuesday. 

The Analysts

• Raymond James analyst Steven Seedhouse maintained a Strong Buy rating on Gilead and lowered the price target from $90 to $85.
• Piper Jaffray analyst Tyler Van Buren maintained a Neutral rating and $75 price target.
• Citigroup downgraded Gilead from Buy to Neutral and lowered the price target from $100 to $75.
• Wells Fargo Securities downgraded Gilead from Outperform to Market Perform and reduced the price target from $89 to $68.

RayJay: NASH Trials Doomed, Yet Fundamental Thesis Intact

The data from the STELLAR 3 study in F3 NASH that's due in the second quarter may not be any different, Seedhouse said in a Monday note.

The analyst said he does not expect positive results from the Phase 2 ATLAS combo study of selonsertib plus Gilead's FXR agonist and ACC inhibitor.

RayJay removed NASH from its model despite Gilead's reiteration of its commitment to NASH. Yet Seedhouse said he sees the possibility of a near-term acquisition of a late-stage NASH asset, with Intercept Pharmaceuticals, Inc. (NASDAQ: ICPT) being the likely candidate if its REGENERATE study succeeds.

" ... GILD should be much more investable to many and our fundamental thesis (HIV strength, pipeline upside from filgotinib, CAR-T and NASH but now through acquisition only) remains intact," the analyst said. 

Piper Jaffray: STELLAR 4 Miss Largely Expected

Notwithstanding the disappointing STELLAR 4 trial results, there is reason to believe a bigger improvement could be observed in the STELLAR 3 trial due to the less severe population in the study, Van Buren said in a Monday note. 

The unofficial 15-percent treatment benefit threshold required to reach statistical significance continues to be a big hurdle, the analyst said. 

"We believe this further emphasizes the need for combination therapies to reduce fibrosis, the most important prognostic indicator of cirrhosis and ultimately liver transplant." 

Since Piper Jaffray did not include NASH in its model, the sell-side firm maintained its price target for Gilead shares. Moving forward, the firm projects that any success in NASH could lead to upside.

The Price Action

Gilead shares were down 4.61 percent at $64.51 at the time of publication Tuesday. 

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