Gilead Sciences, Inc. (GILD) — This stock has been a Trade of the Day favorite for more than two years. It has consistently outperformed other large-cap biotechs, thanks in large part to strong sales of the company’s successful — and expensive — hepatitis C treatment Sovaldi and recently approved follow-on medication Harvoni.
On Dec. 22, GILD stock fell more than 14% when it was announced that pharmacy benefit manager Express Scripts Holding Company (ESRX) would make competitor AbbVie Inc’s (ABBV) newly approved, cheaper alternative hepatitis C treatment, Viekira Pak, its preferred treatment.
Following this news, S&P Capital IQ lowered its 12-month target on GILD stock from $150 to $135. However, it maintained its “strong buy” rating and said shares are “attractively valued.”
Its analysts expect the company’s hepatitis C program to retain its dominant market position. Additionally, they believe Viekira’s price advantage will be eliminated for many patients eligible for an eight-week treatment regimen of Harvoni.
They maintained their 2014 earnings estimate of $8.29 per share and only reduced their 2015 estimate by $0.58 to $9 per share. Revenue is forecasted to increase 13% next year to $27.6 billion, nearly half of which is expected to come from sales of Sovaldi and Harvoni.
On Oct. 31, GILD stock peaked at $116.83, and then fell while still retaining its strong uptrend. On Nov. 18, I said shares would decline to at least $95, where I recommended buying them.
On Dec. 23, GILD stock fell to a low of $85.95, slicing below its 200-day moving average at $92. However, it didn’t stay there long, reversing up on a small gap.
I’m lowering my trading objective from $116 to the resistance line at $110. But investors should hold GILD stock as a cornerstone of an aggressive biotechnology portfolio for Capital IQ’s target of $135.
