Street Calls of the Week
Investing.com - Gilead Sciences Inc (NASDAQ:GILD), a prominent biotechnology company with a market capitalization of $137 billion and strong financial health according to InvestingPro analysis, faces uncertainty after RBC analysts suggested the company’s HIV medication Biktarvy could be the target of President Trump’s recent comments about drug pricing.
During a recent announcement related to a Pfizer deal, President Trump referenced an unnamed medication that costs $137 per pill in the U.S. and approximately $10 elsewhere, stating he aims to reduce the U.S. price to $15-$18 per pill. RBC noted that Biktarvy’s list price of $140.53 per tablet closely matches the President’s description. The potential impact on pricing comes as Gilead maintains robust annual revenues of $28.86 billion and a healthy gross profit margin of 78.5%.
RBC calculated that if Biktarvy is indeed the target and price reductions occur in the Medicaid channel, Gilead could see its annual Biktarvy revenue drop by approximately 12%, from $12 billion to $10.6 billion. This reduction could potentially impact RBC’s valuation of Gilead by about 5% or $4.70 per share. Despite these concerns, InvestingPro’s Fair Value analysis suggests the stock remains slightly undervalued, with additional insights available in the comprehensive Pro Research Report covering 1,400+ top stocks.
The analysts identified several other medications with list prices in the $135-140 range, including Madrigal’s Rezdiffra, Harmony’s Wakix, Pfizer’s Paxlovid and Braftovi, BioMarin’s Kuvan, and GSK’s Brexafemme. However, various factors make some of these less likely targets than Biktarvy.
RBC noted that arguments against Biktarvy being the target include uncertainty about whether Trump’s reference was to list or net pricing, questions about whether HIV medications would be an initial focus for pricing reforms, and indications that Biktarvy costs more than $10 in European markets.
In other recent news, Gilead Sciences has received an affirmation of its A3 senior unsecured ratings from Moody’s, with an outlook upgrade to positive, driven by advancements in its product pipeline, including the regulatory approval and launch of Yeztugo. Rothschild Redburn has also increased its price target for Gilead Sciences to $143 from $136, maintaining a Buy rating, citing strong physician feedback on Yeztugo, a long-acting injectable for HIV prevention. In partnership with the U.S. State Department and PEPFAR, Gilead announced plans to deliver lenacapavir, its twice-yearly injectable HIV prevention medication, to high-incidence, resource-limited countries, aiming to reach two million people over three years. This initiative will see Gilead supply the medication at no profit, in collaboration with the Global Fund. Additionally, Gilead has started construction on a new Pharmaceutical Development and Manufacturing Technical Development Center at its Foster City headquarters, as part of a $32 billion investment in U.S. innovation through 2030. The new facility will feature advanced digital infrastructure and flexible lab spaces. These developments highlight Gilead’s ongoing commitment to innovation and global health initiatives.
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