We are reverting to a Neutral recommendation on
Gilead Sciences, Inc.
) as we believe that the current price reflects all the positive
news. Consequently, there is limited scope for stock price
appreciation at Gilead. The stock carries a Zacks Rank #3 (Hold)
in the short run.
Why Back to Neutral?
Gilead reported in line adjusted earnings of 48 cents per share
in the second quarter of 2013. The company's second quarter
earnings were above the year-ago figure by a penny. Revenues
climbed 15% to $2.77 billion, surpassing the Zacks Consensus
Estimate of $2.68 billion. The year-over-year increase in total
revenue was attributable to higher product sales. Foreign
exchange fluctuations adversely impacted product sales by $21
Newly launched products like Complera/Eviplera and Stribild did
very well in the quarter. The product portfolio was further
strengthened by the European approval of HIV drug cobicistat (150
mg version) a few days ago. The drug will be marketed in the EU
under the trade name Tybost.
Gilead expects 2013 product revenue in the range of $10-$10.2
billion, reflecting an increase of 6%-9% over 2012 levels. We
expect Gilead to easily achieve the guidance driven by its strong
Gilead boasts of a robust pipeline led by the late-stage HCV
candidate, sofosbuvir. The candidate is under review both in the
U.S. (target date: Dec 8, 2013) and the EU. Gilead is highly
optimistic about the potential of sofosbuvir. We expect
sofosbuvir to be approved in the U.S. in December.
Approval of sofosbuvir would bring down the duration of HCV
therapy to 12-16 weeks. Moreover, the current standard of care
comes with several side effects, which make it difficult for
patients to remain on treatment. Approval of the candidate would
not only boost Gilead's top line, but also strengthen its
position in the lucrative HCV market. A sizeable population
suffers from HCV the world over. However, the treated population
is much lower. This leaves the field open for new
treatments. Apart from the late-stage pipeline, Gilead has
multiple candidates in mid/early stages of development. The
successful development of the pipeline candidates will help drive
We believe the current price reflects all the positive news and
are reverting to a Neutral recommendation on the stock from
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). Actelion carries a Zacks Rank #1 (Strong Buy), while
Mylan and Actavis are Zacks #2 Ranked (Buy) stocks.
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