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Gilead Soothes Price War Worry With Q1 Results

Gilead Soothes Price War Worry With Q1 Results
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Gilead Sciences, Inc. (NASDAQ: GILD) gained more than 3 percent early in Friday's session on earnings and news that first quarter revenue from its hepatitis C treatments rose sequentially by 19 percent to well ahead of Wall Street's estimates.

Shares traded recently at $105.48, up 5 percent.

"This should offer relief" to investors who feared Gilead had taken to too much discounting, said Morgan Stanley's Matthew Harrison.

AbbVie Inc. (NYSE: ABBV) entered the hepatitis C market late last year and obtained an exclusive supply agreement with pharmacy benefits manager Express Scripts Holding Co. (NASDAQ: ESRX).

Gilead responded by inking its own supply contract with CVS Health Corp. (NYSE: CVS) in January.

On Thursday, Gilead estimated that it had a 90 percent U.S. market share for hepatitis C drugs during the first quarter.

Sales of Gilead's Sovaldi and Harvoni drugs totaled $4.55 billion in the recent period, 26 percent higher than Wall Street expected. Total revenue grew 52 percent to $7.59 billion.

Harrison maintained an Overweight rating on Gilead and boosted his price target about 1 percent to $109.

Related Link: Gilead Sciences Rallying Off Q1 Beat: A Technical Look

But intensified competition is expected next year with Merck & Co. Inc.'s (NYSE: MRK) launch of its own hepatitis C drug, Bank of America's Ying Huang said.

Although Merck's candidate appears less effective in early testing, "they can gain meaningful market share with an aggressive pricing strategy," Huang said of Merck.

Huang maintained and Underperform rating on Gilead and $94 target, citing concerns about "long-term sustainability" for both its hepatitis c and HIV sales.

But while Barclay's Geoff Meacham believes that Gilead's "discounting may increase" during the remainder of 2015, "the conversation will increasingly focus on broader patient access," in effect expanding the market, Meacham said.

Meacham maintained an Overweight rating on Gilead and $125 target, citing "compelling trends" in hepatitis C as well as potential new products.

Cowen's Philip Nardeau expects the full impact of first-quarter discounting won't be seen until second-quarter results are posted.

Nardeau forecast a "modest" sequential decline in Gilead's hepatitis C sales in the second quarter. But he boosted his full-year sales estimate for the segment by nearly 14 percent to $16.5 billion.

"Long-term worries over the hepatitis C franchise will persist," according to Nardeau, who maintained an Outperform rating and $125 target.

Latest Ratings for GILD

Sep 2017RBC CapitalInitiates Coverage OnOutperform
Aug 2017ArgusUpgradesHoldBuy
Aug 2017Credit SuisseMaintainsOutperform

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