Citigroup said it’s “very bullish” on Gilead’s HIV franchise, arguing it’s the drugmaker’s biggest value driver as the company’s new product cycle focused on long-acting oral drugs is overlooked by investors.
GILD stock rose 1.5% in early trade after the Wall Street bank said a strong launch of lenacapavir in pre-exposure prophylaxis (PrEP) and expansion of several “differentiated” combos in HIV treatment should more than offset potential inclusion of Biktarvy in 2028 Inflation Reduction Act negotiations and “nominal changes” to HIV prevention policy.
High Hopes for New HIV Medicine
Gilead announced positive data on lenacapavir, a twice-yearly shot to prevent HIV, which it hopes to roll it out this summer and which has been estimated at hitting $6 billion in peak annual sales by 2030.
But the stock took a hit after it was reported last week that the Health and Human Services Department is weighing plans to “drastically” cut the federal government’s funding for domestic HIV prevention, which could hit certain drugmakers.
Citi doesn’t think this will have much impact, however. Oppenheimer analysts were similarly unmoved by some recent headlines, noting how the cuts would only impact funding for statewide prevention initiatives and not reimbursement for preventative treatments like lenacapavir, and arguing that it didn’t see any “material threats to our current growth assumptions.”
JPMorgan analysts also said that while the Wall Street Journal’s report on potential Centers for Disease Control and Prevention funding cuts for HIV prevention is “clearly not a positive” for Gilead, any cuts would not impact access to PrEP, which account for roughly 8% of Gilead’s total revenues.
Meanwhile, Gilead has previously said changes to Medicare’s prescription drug plan that take effect in 2025, include a $2,000 spending cap, will cost Gilead $1.1 billion in lost revenues this year. The so-called “Part D reform” refers to changes to Medicare Part D, the prescription drug coverage part of Medicare, aimed at improving affordability and access to medications by lowering costs.
Nevertheless, Citi said remains “very bullish” on Gilead’s HIV franchise, based on a “meaningful” new product cycle for long-acting orals, with it now modelling Biktarvy 2030 peak sales of $15 billion. Citi kept a Buy rating on Gilead with a $125 price target.
HIV medicines make up about two-thirds of Gilead’s annual revenues. Gilead’s HIV product sales increased 8% to $19.6 billion last year, against total revenues of $28.6 billion, with the remainder largely made up from its liver disease and oncology businesses.
Is GILD a Good Stock to Buy?
On Wall Street, analysts have a Strong Buy consensus rating on GILD stock, based on 17 Buys and six Holds. The average GILD price target of $114.47 implies about 4% upside.
