On Wednesday, RBC Capital adjusted its outlook on Gilead Sciences (NASDAQ:GILD), increasing the price target to $74 from $72 while maintaining a Sector Perform rating. The revision follows positive data from a recent HIV prevention study.
The analyst from RBC Capital noted the impressive efficacy of Gilead's lenacapavir in the PURPOSE-1 PrEP study, which has led to a rise in the company's stock. Further analysis of HIV PrEP studies indicates that the upcoming PURPOSE-2 study for lenacapavir should also yield positive results and pave the way for regulatory approval.
The analyst highlighted the potential for lenacapavir to achieve higher peak sales compared to Descovy PrEP, especially with the expected inclusion of cisgender women in its usage label. The drug's strong clinical efficacy and its unique six-month dosing regimen were also pointed out as advantages.
However, despite these positive attributes, there are anticipated challenges in reaching many high-risk individuals, with administration being one of several barriers, along with some expected cannibalization of existing products.
As a result of these findings, RBC Capital has increased its probability of success estimate for lenacapavir as a PrEP treatment to 95% and raised the projected market potential to $2.1 billion, which contributed to the higher price target for Gilead's shares.
The analyst concluded that while the prospects for lenacapavir and another candidate, seladelpar, are promising, Gilead will likely need further successes in its HIV lifecycle programs, such as bic-len, or expansion into new therapeutic areas to counterbalance headwinds from the Inflation Reduction Act, competitive pressures in oncology, and long-term loss of exclusivity for Biktarvy. This would be necessary to achieve significant earnings growth and valuation multiple expansion. The current valuation of Gilead's shares is seen as fair by RBC Capital.
In other recent news, Gilead Sciences has seen a series of significant developments. The company reported a 6% year-over-year rise in total product sales during its second quarter of 2024, reaching $6.7 billion, driven by an 8% rise in sales for its HIV treatment, Biktarvy, and a 23% increase for the oncology drug, Trodelvy. Following these results, Gilead revised its full-year non-GAAP operating income and EPS guidance upwards.
Gilead also received accelerated approval from the FDA for Livdelzi, a treatment for Primary Biliary Cholangitis (PBC). Notably, Livdelzi is the first PBC medication to include clinical improvement of pruritis on its label. This approval is anticipated to significantly broaden the PBC market, according to TD Cowen and BMO Capital Markets.
In terms of analyst perspectives, TD Cowen maintained a Buy rating and $85.00 price target for Gilead, while BMO Capital Markets sustained an Outperform rating and a price target of $85.00. Truist Securities, on the other hand, adjusted its price target for Gilead to $83.00, keeping a Hold rating on the stock.
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