Gilead Sciences, Inc. (NASDAQ:GILD) is scheduled to report third-quarter earnings on November 01. The quarter will be very significant in either turning or emphasizing largely negative investor sentiment driven by declining sales from the company’s core Hepatitis C franchise. Baird analyst, Brian Skorney, cut the price target on Gilead stock ahead of the earnings from $122 to $100, citing weakness of HCV prescription trends.
The analyst also lowered Gilead’s third quarter revenue estimates from its three key HCV drugs: Sovaldi, Harvoni, and Epclusa. He commented in a research note, "As questions about the durability of Hep C sales plague GILD shares, we've taken a deeper look into the pace of U.S. Hep C prescriptions this quarter to adjust our model. Encouragingly, trends indicate that core new prescriptions (i.e., ex-Epclusa) may be stabilizing. We have modestly changed our 3Q16 revenue estimates for Gilead's portfolio, and continue to think the consensus is setting them up for another miss on Hep C. We are lowering our target price to $100." Mr. Skorney maintains an Outperform rating on Gilead stock.
Gilead cut its revenue guidance last quarter for the first time in several years, shocking investors into the reality of HCV decline. The biotech giant enjoyed phenomenal growth in the past two years on the back of Sovaldi and Harvoni, which primarily served to cure the debilitating liver disease within as little as 8-12 weeks of treatment. The company grew into a $30-billion-a-year in sales mammoth with the success, so much so that it may find it very hard to sustain its level of growth with HCV sales having peaked. Most analysts are expecting a miss in this quarter. Shares have dropped almost 29% year-to-date to close at $72.64 on Monday.
RBC Capital Markets analysts, however, raised their 3Q earnings estimate for Gilead earlier this month, based on higher-than-expected scripts for Sovaldi and Epclusa during the quarter which helped offset the massive decline in Harvoni’s scripts. “IMS suggests GILD HCV scripts are down -11% Q/Q but they are not falling as sharply as we had conservatively modeled (-20% Q/Q), primarily due to +8% Q/Q script growth for Epclusa and Sovaldi in Q3 that help offset -18% Q/Q decline in Harvoni scripts,” they wrote in a research note.