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As Gilead's Outlook Dims, Argus Downgrades

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As Gilead's Outlook Dims, Argus Downgrades
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Biotech stocks are given to high volatility, given several risks confronting the sector, namely FDA decisions, clinical trial results, competitive pressure and drugs falling off patents. Gilead Sciences, Inc. (NASDAQ: GILD) — which has made a name for itself in the HIV and hepatitis C treatment spaces —has risks surrounding its outlook, according to Argus. 

The Analyst 

Argus analyst David Toung issued a downgrade, lowering the firm's rating on Gilead's shares from Buy to Hold.

The Thesis

Sales of Gilead's hepatitis C products are deteriorating faster than anticipated, Toung said in a Monday note. (See Toung's track record here.)

Fewer patient starts and the competitive impact from the launch of a pan-genotype hepatitis C drug by AbbVie Inc (NYSE: ABBV) have created headwinds for sales of Epclusa, Toung said.

The analyst also projects an accelerated decline in Harvoni and Sovaldi sales. 

Gilead's HIV products are plateauing, Toung said. Hepatitis C and HIV products account for 68 percent of Gilead's sales, according to Argus. 

"More than two-thirds of Gilead's revenue is on a flat-to-down trajectory," Toung said. 

See also: Attention Biotech Investors: Here Are November PDUFA Catalysts On The Horizon

Gilead faces operating margin pressure in 2018 from declining revenues, as well as higher R&D expenses to support development of the CAR-T program, acquired as part of Gilead's purchase of Kite Pharma Inc (NASDAQ: KITE), according to Argus. 

Argus lowered its adjusted earnings per share estimates for Gilead in 2017 from $8.60 to $8.50 and from $7.50 to $7 in 2018.

The Price Action

Gilead was trading down about 1 percent at $73.05 at the time of publication. 

Gilead Sciences shares have been up 3.49 percent since the start of the third quarter, outperforming the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ: IBB), which has been up 0.68 percent.

For the year-to-date period, Gilead has gained only 2.29 percent compared to the iShares NASDAQ Biotechnology Index's 17.64 percent rally

Related Link:

A Big Biotech ETF Is About To Get Cheaper

Latest Ratings for GILD

DateFirmActionFromTo
Oct 2018Raymond JamesMaintainsStrong BuyStrong Buy
Oct 2018Cantor FitzgeraldMaintainsOverweightOverweight
Oct 2018PiperJaffrayDowngradesOverweightNeutral

View More Analyst Ratings for GILD
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Posted-In: Argus David Toung GileadAnalyst Color Downgrades Health Care Analyst Ratings General Best of Benzinga

 

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