Credit Suisse Sets Outperform Rating, $125 Target On Gilead Story

• Gilead Sciences, Inc. GILD share are down 11 percent since January 4.
• Credit Suisse’s Alethia Young initiated coverage of the company with an Outperform rating and a price target of $125.
• Concerns related to the company’s ability to sustain its HIV and HCV revenues are overdone, Young believes.

Analyst Alethia Young mentioned that Gilead Sciences has both the means and the motive to reinvigorate growth this year. Concerns surrounding the company’s ability to sustain its $33 billion HIV and HCV revenue empire have restricted the stock’s upward movement in 2015.

“The consensus view of Gilead is that there is a major patent cliff for the $13.5B HIV franchise in 2018-2021. For its Hep C franchise, there are also concerns around a lack of sustainability of revenues. These concerns have contracted the 2016 P/E multiple to ~7x.,” the Credit Suisse report noted.

Young believes that these fears are overdone and that the company’s shares are currently trading at a steep discount relative to its sustainable earnings. An analysis of the HIV market reveals that the “new HIV franchise still leaves Gilead with a $10B HIV franchise in 2023 (after generics) vs. $13.5B in 2016,” Young pointed out.

Catalysts that could boost Gilead Sciences’ future performance include the TAF[HIV] franchise launch in 2016, Merck & Co., Inc. MRK approval and net pricing of its competitor HCV regimen, readout of NASH pipeline, potential deals, and more details on the new HIV drug GS-9883, the analyst mentioned.