Gilead Sciences, Inc. (GILD) Investors Are Drowning in Negativity

The hits keep coming for Gilead Sciences, Inc. (NASDAQ:GILD), and not in a good way, as a third piece of bad news in less than a week further pressured GILD stock.

Gilead Sciences, Inc. (NASDAQ:GILD) GlaxoSmithKline is comingShares in Gilead Sciences dropped more than than 2% in early Monday trading after a report that rival GlaxoSmithKline plc (ADR) (NYSE:GSK) is targeting its leading position in the HIV treatment market.

Glaxo is working to replace the standard three-drug cocktail to treat HIV with a two-drug regimen. That would reduce the chance of side effects for patients as well as dramatically cut costs. If Glaxo’s two-drug therapy becomes the preferred treatment protocol, the pharma giant could supplant Gilead as the dominant provider of HIV treatment within three years.

And that’s just the latest blow to GILD stock.

Shares have been tumbling since early last week on a target-price cut and concerns over its hepatitis-C drug sales. Leerink Swann cut its price target to $112 from $114 and maintained an “Outperform” rating (buy, essentially). That’s hardly a damning assessment of GILD stock. Rather, it was the commentary that hurt shares.

The healthcare investment bank is worried about the future trajectory of HIV drug sales. As analysts said in a note to clients:

“While we underestimated the company’s U.S. volume growth, we overestimated the rate of switching from legacy products onto new tenofovir alafenamide (TAF)-based regimens.”

Soon thereafter, analysts at Citigroup said data show that sales of GILD’s hepatitis-C drug may miss estimates.

From Citigroup:

“IMS scripts are down ~14.3% QTD vs. last Q and if we assume a further 0%-5% price decline for commercial pts, we see Non-veterans affairs sales at $1.3B-1.4B vs. $1.6B estimated for last Q. We estimate VA sales in 2Q’16 at ~$400M and believe they could be same for 3Q’16 given fixed budget. This gives us 3Q’16 IMS projected demand of $1.7-$1.8B. We exclude $279M one-time adjustment in 2Q’16 for our 2Q real demand calculation. Please see chart below. Caveat – We assume IMS capture rate to be same as last Q. New patient starts have declined by 11% in 3Q’16 vs. 2Q’16 QTD. Inventory change is another unknown. Any incremental sales to VA from Q2’16 would be upside to these projections.”

All told, Gilead stock has lost about 4.4% over the last five trading sessions.

Unfortunately for GILD shareholders, this has been a recurrent theme all year long. The stock is off 23% so far in 2016. That lags the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) by nearly 9 percentage points.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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