We recently maintained our Neutral recommendation on
Gilead Sciences, Inc.
). Our target price is $55.00 per share.
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Why the reiteration?
In May 2013, Gilead reported lower-than-expected earnings in the
first quarter of 2013. Lower-than-expected revenues were
responsible for the earnings miss during the first quarter of
2013. Revenues climbed 11% to $2.53 billion but missed the Zacks
Consensus Estimate of $2.56 billion. The year-over-year increase
in total revenue was attributable to higher product sales.
We are encouraged by the approval of Complera/Eviplera, which
together with Stribild has further fortified the HIV franchise at
Gilead. The company is looking to combat the threat of
genericization by inking deals and acquisitions and introducing
new products. Gilead still expects product revenue for 2013 in
the range of $10-$10.2 billion, reflecting an increase of 6%-9%
over 2012 levels. We expect Gilead to easily achieve the
increased guidance driven by its strong product portfolio.
We are also impressed by Gilead's efforts to develop its
pipeline. The company is highly optimistic about the potential of
its pipeline candidate sofosbuvir, which aims to treat patients
suffering from hepatitis C virus (HCV). The candidate is under
review both in the US and the EU. 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 growth.
We remain concerned about the generic threat looming over key
drugs at Gilead. With generic competition looming large over the
company, Gilead's pipeline needs to deliver. We see limited scope
for upside until more visibility is obtained on the pipeline
development . Consequently, we retain our Neutral stance on the
Other Stocks to Consider
Gilead carries a Zacks Rank #4 (Sell), reflecting short-term
pressure on the stock. Favorably placed stocks in the biopharma
Jazz Pharmaceuticals Public Limited Company
Alnylam Pharmaceuticals, Inc.
Alexion Pharmaceuticals, Inc.
). While Alexion Pharma and Alnylam Pharma carry a Zacks Rank #2
(Buy), Jazz Pharma carries a Zacks Rank #1 (Strong Buy).