In Light Of Negative Sentiment, Gilead's Q1 Results Weren't So Bad

Shares of Gilead Sciences, Inc. GILD were trading lower by more than 2 percent Wednesday morning after the company's first quarter earnings and revenue fell short of what analysts were expecting.

Although Gilead's numbers point to a top-and-bottom line beat, Barclays' Geoff Meacham maintained an Overweight rating with an $85 price target as he believes the report was "acceptable."

Meacham commented in a research report that Gilead's reiteration of its 2017 guidance implies its fundamentals remain stable and aren't worsening. The analyst added that while a better outlook for Gilead's HIV franchise won't be enough to justify a re-rating, it's worth noting that Genvoya is accelerating "dramatically" while bictegravir/TAF could also be a "game-change" in HIV.

Meacham also highlighted some of the negatives aspects of the quarter, including hep C sales which were "very weak" given a 40 percent year-over-year decline and 20 percent quarter-over-quarter decline. The analyst believes this could be attributed to an unfavorable payer mix/competition and this trend is factored into the full-year guidance.

Looking Forward

Meacham stated that Gilead's pipeline of Phase 3 trials (selonsertib, andecaliximab, filgotinib) are "adding up but not quite at a critical mass." But the analyst is still caution on whether positive top-line data could change the overall sentiment on the pipeline favorably.

The analyst also believes a key conversation surrounding Gilead moving forward will be M&A activity. The company's approximately $3 billion in operating cash flow in the first quarter does provide management with lots of optionality and the ability to find a sizable, synergistic, or smart deal that can change the sentiment.

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