Gilead Sciences Upgrades 2020 Earnings Forecast on Strong Demand for Remdesivir

The U.S. drugmaker Gilead Sciences revised its full-year 2020 profit guidance as the second wave of coronavirus infections boosted the demand of Remdesivir, an antiviral agent that scientists initially designed to treat Ebola, also, beneficial for COVID-19 treatment.

The California-based biopharmaceutical company said it has upgraded their total product sales guidance range to the range $24.30 billion to $24.35 billion, reflecting increased remdesivir sales as hospitalization and treatment rates were higher than expected given the most recent COVID-19 surge.

The commercial-stage biotechnology company forecasts adjusted earnings to $6.98-$7.08 per share, up from a previous forecast of $6.25- $6.60 per share.

At the time of writing, Gilead Sciences shares traded 0.66% lower at $62.62 on Monday; the stock fell 10% in 2020.

Analyst Comments

Gilead Sciences (GILD) pre-announced a positive Q4 driven mostly by Remdesivir (RemD) as the value remains high. Bottom line is based on our conversations w/ mgmt, the co is confident about growth in 2021 and beyond. ’21 Guidance should be OK (or conservative) and separating out RemD will also show growth of underlying biz. GILD should generally move back up in 2021 on improving sentiment and also on new data this year,” said Michael J. Yee, equity analyst at Jefferies.

“For 2021, we could see GILD guide EPS $6.00-7.00 vs cons $6.57, with RemD and expenses as key swing factors – with the key issue that RemD is a wide range. We raised our H1:21 RemD estimates by $1 billion, which brings total 2021 RemD to $2.5 billion, given Q4:20 sales were strong and COVID-19 vaccines are just being rolled out. We raised our EPS from $5.74 to $6.15 but acknowledge RemD could be a wide range. Overall, the key message is 2021 should be fine and defined as a success if numbers are in-line but NEW clinical datasets read out positive from IMMU, RCUS, and FTSV (filing to FDA already in 2021 on MDS with CD47 drug),” J. Yee added.

Gilead Sciences Stock Price Forecast

Twenty-three analysts who offered stock ratings for Gilead Sciences in the last three months forecast the average price in 12 months at $73.94 with a high forecast of $100.00 and a low forecast of $61.00.

The average price target represents a 17.44% increase from the last price of $62.96. From those 23 analysts, ten rated “Buy, twelve rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $67 with a high of $88 under a bull scenario and $35 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the biotechnology company’s stock.

Several other analysts have also recently commented on the stock. Redburn Partners assumed coverage on Gilead Sciences and issued a “neutral” rating on the stock. Credit Suisse Group reduced their target price to $65 from $70 and set a “neutral” rating on the stock.

In addition, SVB Leerink reduced their target price to $79 from $88 and set an “outperform” rating on the stock. Truist Financial cut their price target to $62 from $67. At last, UBS Group assumed coverage and set a “neutral” rating and a $61 price target on the stock.

Upside and Downside Risks

Risks to Upside: Better than expected pipeline success on key late-stage drugs – highlighted by Morgan Stanley.

Risks to Downside: Failure of Trodelvy to achieve significant market penetration & failure to meaningfully expand label. Unexpected competition in HIV. Failure of CAR-T to achieve significant market penetration & failure to meaningfully expand CAR-T label. Significant delays with regulatory progress for JAK inhibitor filgotinib.

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Gilead Sciences Shares Rise 6% After U.S. FDA Approves Remdesivir for COVID-19 Treatment; Target Price $75

Gilead Sciences Inc, an American biopharmaceutical company that researches, develops and commercializes drugs, said that the U.S. Food and Drug Administration has approved the antiviral drug remdesivir for the COVID-19 treatment, sending its shares up about 6% in pre-market on Friday.

Previously authorized by the FDA for emergency use to treat COVID-19, remdesivir is now the first and only approved COVID-19 treatment in the United States. The drug is now widely available in hospitals across the country, following early investments to rapidly expand manufacturing capacity to increase supply, the company.

Following this announcement, Gilead Sciences shares rose about 6% to $64.11 in pre-market trading on Friday; however, the stock is down nearly 7% so far this year.

Executive comments

“The approval of Veklury (remdesivir) marks an important milestone in efforts to help address the pandemic by offering an effective treatment that helps patients recover faster and, in turn, helps preserve scarce healthcare resources,” said Barry Zingman, MD, Professor of Medicine at the Albert Einstein College of Medicine and Montefiore Medical Center, New York.

“The availability of a rigorously tested treatment that can significantly speed recovery and offers other benefits such as lower rates of progression to mechanical ventilation, provides hospitalized patients and their families important hope and offers healthcare providers a critical tool as they care for patients in need.”

Gilead Sciences Stock Price Forecast

Twenty-one equity analysts forecast the average price in 12 months at $79.38 with a high forecast of $105.00 and a low forecast of $67.00. The average price target represents a 30.84% increase from the last price of $60.67. From those 21 equity analysts, nine rated “Buy”, ten rated “Hold” and two rated “Sell”, according to Tipranks.

Gilead Sciences had its target price reduced by Royal Bank of Canada to $82 from $84. They currently have an outperform rating on the biopharmaceutical company’s stock. Citigroup lowered their price target to $75 from $80 and Jefferies cut price target to $75 from $78.

Several other analysts have also recently commented on the stock. Maxim Group raised Gilead Sciences from a hold rating to a buy rating and set a $88 price objective. Oppenheimer lifted their price objective to $105 from $90 and gave the stock an outperform rating. BidaskClub lowered their rating to a strong sell from a sell in July.

We think it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator signal a selling opportunity. However, in the best-case scenario target price $75.

Analyst Comments

“The ongoing pandemic impacted Gilead’s sales for both the HCV and HIV franchises, which caused fewer health care provider visits and screenings. HIV sales are impacted by lower sales volume of Truvada. Meanwhile, the company lifted its annual guidance probably to account for sales from its antiviral drug remdesivir for COVID-19. Nevertheless, the strong performance of Biktarvy maintains a solid momentum. Gilead is seeing early signs of recovery from this impact and expects a full rebound by the second half. Increase in demand for remdesivir should boost the top line. Shares have outperformed the industry in the past year. However, the prospects of remdesivir will be hit once a vaccine is out,” noted equity analysts at ZACKS Research.

“Gilead’ strong HIV franchise should help the company maintain momentum. Newly launched products should continue to perform well, thereby driving top-line growth. (But) Weaker-than-expected performance of HCV franchise due to lower sales of Harvoni and Sovaldi is concerning. Pipeline setbacks and stiff competition remain a threat as well.”

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U.S. Stocks Set To Open Higher As U.S. Approves Remdesivir For Use Against COVID-19

U.S. Approves Gilead’s Remdesivir As COVID-19 Drug

Shares of Gilead are gaining about 4% in premarket trading as U.S. approved remdesivir as a treatment for COVID-19. While many drugs have been tested to fight against the disease, only Gilead’s remdesivir managed to get regulator’s approval.

This approval will likely provide support to other companies in the sector. Vaccine developers Pfizer, BioNTech, Moderna are also gaining ground ahead of the market open.

The first drug approved for the use against coronavirus could provide additional support to the general market as traders are eager to buy stocks on any hint that the world will be able to solve the coronavirus crisis.

Traders Remain Focused On Stimulus Negotiations

This week’s news flow was dominated by reports about the ongoing stimulus negotiations. The market action was choppy as traders tried to evaluate whether Republicans and Democrats will be able to reach a compromise deal before November elections.

House Speaker Nancy Pelosi has recently stated that negotiations continued to progress. However, it remains to be seen whether Republicans will be ready to vote for a huge stimulus package that is proposed by Democrats.

Today, S&P 500 futures are gaining ground in premarket trading as traders are in optimistic mood ahead of the weekend. However, the situation may change quickly if evidence emerges that aid negotiations have stalled.

All Eyes On Flash PMI Data For October

Today, U.S. will release Flash PMI reports for October. Manufacturing PMI is expected to increase from 53.2 in September to 53.4 in October while Services PMI is projected to stay unchanged at 54.6.

Reports from other countries signaled that the services segment was struggling amid a second wave of the virus.

Euro Area Services PMI declined from 48 in September to 46.2 in October compared to analyst consensus of 47. Numbers below 50 show contraction. In the UK, Services PMI declined from 56.1 to 52.3 while analysts expected Services PMI of 54.

A weaker-than-expected U.S. Services PMI report will signal that economic recovery is losing steam and may put some pressure on stocks, although stimulus negotiations will remain the most important driver for the market.

For a look at all of today’s economic events, check out our economic calendar.

Gilead Sciences to Acquire Immunomedics for $21 Billion; Target Price $75

Gilead Sciences Inc, an American biopharmaceutical company that researches, develops and commercializes drugs, announced to acquire a pharmaceutical company Immunomedics Inc for $21 billion or $88.00 per share in cash, a move that will help strengthen its drugs portfolio for cancer.

The agreement will provide Gilead with Trodelvy, a first-in-class Trop-2 directed antibody-drug conjugate that was granted accelerated approval by the U.S. Food and Drug Administration in April for the treatment of adult patients with metastatic triple-negative breast cancer who have received at least two prior therapies for metastatic disease, the company said.

Gilead anticipates closing the deal during the fourth quarter of 2020.

“Investors may take some time to digest all the deals but these add lots more drivers and clear momentum in oncology and less reliance on HIV. Maintain Buy. We are positively biased on the acquisition as this moves Gilead Sciences (GILD) quickly into a commercial footprint for solid tumors and to prepare for other pipeline,” said Jefferies’ equity analyst Michael J. Yee, who gave a price target of $78.

“We think GILD is in a better place for 2021 than a year ago and the stock is still at 10x and out of favor. Digesting it all, we think a strong launch for Trodelvy, great bladder data, and upside positive data from the Phase III HR+ breast cancer study could be the catalyst that makes Street more confident GILD did a good deal,” Yee added.

Lazard and Morgan Stanley & Co. LLC are acting as financial advisors to Gilead. Centerview Partners LLC and BofA Securities are acting as financial advisors to Immunomedics. Cowen & Company, LLC also provided advice to Immunomedics. Davis Polk & Wardwell LLP is serving as legal counsel to Gilead and Watchell, Lipton, Rosen & Katz is serving as legal counsel to Immunomedics.

Gilead Sciences’ shares ended 2.83% higher at $65.58 on Friday; the stock is up about 1% so far this year, gaining over 5% from 2020 low.

Executive comments

“This acquisition represents significant progress in Gilead’s work to build a strong and diverse oncology portfolio,” Gilead Chief Executive Officer Daniel O’Day said in a statement.

“Trodelvy is an approved, transformational medicine for a form of cancer that is particularly challenging to treat. We will now continue to explore its potential to treat many other types of cancer.”

Gilead Sciences stock forecast

Twenty-two analysts forecast the average price in 12 months at $79.06 with a high forecast of $105.00 and a low forecast of $67.00. The average price target represents a 20.56% increase from the last price of $65.58. From those 22 equity analysts, ten rated “Buy”, 11 rated “Hold” and one rated “Sell”, according to Tipranks.

Gilead Sciences had its price target cut by Truist to $67 from $74.00. SunTrust Banks raised their target price on shares of Gilead Sciences to $74 from $73 and gave the company a “hold” rating. Oppenheimer raised their target price to $105 from $90.

Other equity analysts also recently updated their stock outlook. Mizuho restated a “buy” rating and issued an $81.00 price target. Wells Fargo & Co raised their price target to $76 from $69 and gave the company an “equal weight” rating. Credit Suisse Group lowered their stock price forecast to $73 from $75 and set a “neutral” rating. At last, Cfra raised their price target to $74 from $71 and gave the company a “sell” rating.

We think it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator signal a selling opportunity. However, in the best-case scenario target price $75.

Analyst views

“Our merger analysis suggests mid-to-high single-digit % accretion by 2024E: We built a preliminary acquisition model through 2024, with the following key assumptions: (1) $21B acquisition cost financed with $15 billion in cash and $6 billion in debt; (2) debt interest rate of 3%; (3) cash interest rate of 0.75%; (4) We assume mgt. will spend more to accelerate the pipeline and commercial effort in the near- to mid-term. Overall, we see the acquisition as 5% accretive by 2024E,” Matthew Harrison, equity analyst at Morgan Stanley.

Check out FX Empire’s earnings calendar

Mixed China Data, ECB in Focus

On the home front, the University of Oxford and AstraZeneca are working together on a potential vaccine, and yesterday there was chatter that things are going in the right direction. Nothing was announced, but it was speculated that there could be confirmation about the progress in the near-term, and that verification might even come today. Equity benchmarks on both sides of the Atlantic enjoyed decent gains, and some hit multi-week highs, while others set multi-month highs.

The pharma angle gave stocks a new lease of life as lately market participants have been fixated on the rate of new cases and the fatality rate. In the past week, we have also heard positive news from Gilead Sciences, Pfizer and BioNTech. Gilead’s, Remdesivir, can reduce the death rate by 62%, so that is being touted as a possible treatment. While two of the four drugs that Pfizer and BioNTech are working on as potential vaccines have been fast-tracked for FDA approval.

The optimism surrounding the drug stories overshadowed the news that China’s relationship with the US and the UK has deteriorated this week. The British government has banned Huawei from its 5G network. President Trump passed legislation that has removed Hong Kong’s special status, so the territory will lose out in terms of tariffs. In addition to that, the US government might seek to target individuals or organisations that are seen to be helping the Chinese government to impose itself on Hong Kong.

The moves by the UK and the US stem from the decision by the Beijing administration to introduce a law that has chipped away at Hong Kong’s autonomy. Traders will be keeping an eye on the situation, but it seems that the Donald doesn’t want to spark a big economic conflict with China, probably because he has an election to fight in November and his approval ratings are not great.

The US economy continues to rebound. The industrial production rate for June increased by 5.4%, and that was a big improvement from the 1.4% that was posted in May. The New York Fed manufacturing index jumped to 17.2 in July, a 14 month high. The reports suggest there is a lot of pent up demand, and that is being released as the economy is reopening. That level of growth is likely to taper off as it is unsustainable.

Overnight, China released a number of economic reports. The yearly GDP reading for the second quarter was 3.2%, and the consensus estimate was 2.5%. In the first quarter, the GDP reading was -6.8%. Retail sales in June were -1.8%, undershooting the 0.3% forecast, while the previous reading was -2.8%. Industrial production last month showed growth of 4.8%, and economists were expecting 4.7%.

The May report was 4.4%. Fixed asset investment fell by 3.1%, and the forecast was -3.3%, keep in mind the last reading was -6.3%. Equity markets in Asia are in the red as there are concerns that spending and investment in China remains weak. Indices in Europe are expected to open a little lower.

The ECB meeting will be in focus today. The refinancing rate and the deposit rate are tipped to hold steady at 0.0% and -0.5% respectively. Last month, the pandemic emergency purchase programme (PEPP) was upped by €600 billion to €1.35 trillion, and the scheme was extended from the end of 2020 until June 2021. The inflation and growth forecasts were trimmed. It is worth noting that there has been an impressive rebound in certain economic indicators, such as services and manufacturing.

In late June, the bond purchases made as a part of the PEPP, cooled to its lowest level since the stimulus package was expanded. That could be a sign the ECB want to rein in the easing programme as the economy is recovering at a quicker rate than initially expected. Even if the central are happy with the economic rebound, they won’t want to spook the markets. They will probably play it safe and state they are monitoring the situation, and that they are ready to act, should they feel it is required. The rate decision will be revealed at 12.45pm (UK time) and the press conference will start at 1.30pm (UK time).

The US dollar index fell to its lowest level in over one month yesterday as dealers dropped the greenback in favour of riskier assets, such as stocks. The euro benefitted from the slide in the greenback and it hit its highest level since March.

Metals were a mixed bag yesterday. Gold had a muted move, but it held above the $1,800 mark. Silver, benefitted from the softer greenback and it hit a new 10 month high. On the other hand, copper lost over 1.5%. The red metal had a great run from late March until now, and it is possible that dealers squared up their books ahead of the Chinese data being reported.

The Fed’s Beige Book was posted last night and almost all of the 12 districts saw an increase in economic activity as lockdown restrictions were eased. The outlook remains very uncertain, especially in light of the fact that some states are undoing the reopening of their economies.

Oil rallied yesterday on the back of the EIA report, it showed that US oil stockpiles dropped by nearly 7.5 million barrels, while the consensus estimate was for a draw of 2.25 million barrels. Gasoline inventories fell by 3.14 million barrels, and that was a larger drop than expected. The readings paint a picture of a US economy that is consuming more energy, hence the positive move in WTI and Brent crude.

At 7am (UK time) the UK labour reports will be released. The claimants count for June is tipped to fall to 250,000 from 528,900 in May. The unemployment rate is anticipated to rise to 4.2% in May, up from 3.9% in April. The average earnings reading that excludes bonuses to expected to fall to 0.5% in May, from 1.7% in April.

French CPI is tipped to slip to 0.1% in June from 0.4% in May. The report will be posted at 7.45am (UK time).

Traders will be keeping an eye on the various economic reports from the US. Initial jobless claims are tipped to fall from 1.31 million to 1.25 million. The continuing claims reading is anticipated to be 17.6 million, and keep in mind the previous reading was 18.06 million. The retail sales report for May was 17.7%, a record reading, and the June level is tipped to cool to 5%. The retail sales report that strips auto-sales is expected to be 5%, and that would be a fall from the 12.4% registered in May. The Philly Fed manufacturing index is tipped to be 20. The reports will be posted at 1.30pm (UK time).

EUR/USD – since late June it has been in an uptrend, and a break above the 1.1400 zone might put 1.1495 on the radar. A break below the 1.1168 area might pave the way for 1.1053, the 200-day moving average, to be targeted.

GBP/USD – has been trading sideways in the past few sessions. A move higher might run into resistance at 1.2694, the 200-day moving average. A move through that level should put 1.2813 on the radar. Should it move lower, it might find support at 1.2424, the 100 day moving average.

EUR/GBP – Monday’s candle has the potential to be a bullish reversal, and if it moves higher it could target 0.9239. A break below the 50-day moving average at 0.8963, could put the 0.8800 zone on the radar.

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 18 points lower at 6,274

DAX 30 is expected to open 67 points lower at 12,863

CAC 40 is expected to open 19 points lower at 5,089

By David Madden (Market Analyst at CMC Markets UK)