Gilead Sciences Inc. (GILD) is rising on Monday after two analysts made positive calls on the biotech giant. As a reminder, Gilead is now the world's largest pure-play biotech as the market cap is closing in on $125 billion.
Positive calls were seen from both Credit Suisse and from Argus on Monday. Credit Suisse was more positive with a $100 price target versus $90 from Argus. Both firms have the equivalent of Buy ratings in Gilead - Outperform at Credit Suisse and Buy at Argus.
Argus raised the price target to $90 from $84 in the call. That represents 27-times its own 2014 earnings estimate, and reflects expectations for revenue and earnings growth from Atripla, Truvada, and Stribild. Argus called it a compelling growth story and said,
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Gilead delivered strong sales growth in 4Q13, reported on February 4. In addition to sales from existing antiviral and cardiovascular drugs, Gilead’s top line benefited from the launch of Sovaldi, its hepatitis C drug, which generated sales of $136 million in December. In issuing guidance for 2014, Gilead notably excluded any sales from Sovaldi, even though it has been approved in the U.S., Canada and Europe. It expects 2014 sales from core products, excluding Sovaldi, of $11.3-$11.5 billion, an increase of 6%-8% from 2013. It also projects a product gross margin of 75%-77%.
We are raising our 2014 EPS estimate to $3.35 from $3.25, and establishing a 2015 estimate of $5.10. Our revised earnings model includes contributions from Sovaldi and Idelalisib as well as ongoing growth from core pharmaceutical products. We also note the favorable impact from Sovaldi sales on Gilead’s gross margin and tax rate.
Credit Suisse based its target price on 19.5-times its 2015 earnings estimate and a 40% premium to the S&P 500 Index. Three take-home factors include the following:
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- (1) Whilst this survey suggested a higher patient share for ABBV's/ENTA's combination (20-30%/30-40% treatment naïve/experienced - vs. consensus which is ca15%)
- (2)...it also pointed to significant warehousing and concomitant patient tracking, which is likely to result in a market-wide faster and larger patient treatment ramp upon the launch of all-oral, interferon-free regimens in the second half of 2014;
- (3) On pricing, we still consider a ca$100k/ treatment course gross price as obtainable in the US for the initial all-oral, interferon-free regimens; our survey work did highlight the market share sensitivity to pricing. We are still focused on both near term and longer term pricing.
Credit Suisse also put its 2014 to 2018 Hepatitis C vaccine franchise sales higher at $3.9 billion in 2014; $7.9 billion in 2015; $10.4 billion in 2016; $11.3 billion in 2017; and $11.6 billion in 2018.
We wanted to see what the different takes were here because the consensus Gilead price target was up at $99.50. Both of these reports were positive but one was way above the consensus and one is below the consensus. Gilead shares were up almost 3% at $81.00 in the final hour of trading versus a 52-week range of $40.16 to $84.40.
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