GILD - Embedded Expectations Analysis - 2018 08 17
Gilead Sciences Inc. (GILD:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 10.9x Uniform P/E. At these levels, markets are pricing in bearish expectations for the firm, and while management has concerns about short-term headwinds on current products, a strong development pipeline and overall business strength support long-term outperformance and equity upside if GILD is able to maintain current profitability levelsSpecifically, management may be concerned about the amount of work remaining for their NASH developments, particularly about the diagnostic testing complications. Additionally, they may have concerns about the potential for growth to slow within their domestic HIV market. Also, they may be overstating the growth potential for Biktarvy, and the supporting sentiment from the CHMP about marketing authorization for Yescarta in the E.U.
However, management is confident that, aside from short-term uncertainty about consumer mix for their U.S. HIV segment, the overall outlook is very good across the business. Additionally, market expectations for Uniform ROA to decline to historically low levels appear too bearish. As such, multiple expansion and equity upside remain warranted in the long-term
Gilead Sciences is a research-based biopharmaceutical company that discovers, develops and commercializes medicines. The company's primary areas of focus include viral diseases, inflammatory and fibrotic diseases and oncology. The company's products include: Biktarvy for the treatment of HIV-1 infection in certain patients; Vosevi?, a single tablet regimen of sofosbuvir, velpatasvir and voxilaprevir for the re-treatment of chronic hepatitis C virus infection in adults; Vemlidy? for the treatment of chronic hepatitis B virus infection in adults with compensated liver disease; and Yescarta (axicabtagene ciloleucel) for the treatment of adult patients with relapsed or refractory large B-cell lymphoma.
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