Gilead stock bounded off its 50-day line and briefly broke out Friday after the biotech company beat second-quarter forecasts amid its newest launch in HIV prevention.
The company won Food and Drug Administration approval in June for Yeztugo, a twice-annual shot to prevent HIV in people at risk of contracting it. Now, Gilead Sciences is focusing on securing insurance coverage.
Already, Gilead says two major state Medicaids and some commercial plans will cover Yeztugo. The company believes it's on track for 75% coverage by six months postlaunch, with a goal of hitting 90% within a year.
Oppenheimer analyst Matthew Biegler says it will be some time before Yeztugo is growing the PrEP, or pre-exposure prophylaxis, market rather than cannibalizing sales of Descovy. Descovy is Gilead's daily pill to prevent HIV infection. He expects Yeztugo to begin making a meaningful contribution in 2028.
Still, it's possible "Yeztugo comes out of the gates stronger than we expect," he said in a report.
Gilead Stock Breaks Out
Gilead stock jumped 8.3%, closing at 119.41. Shares briefly broke out of a consolidation with a buy point at 119.96, according to MarketSurge.
It's still early in the Yeztugo launch. Gilead doesn't even break out those revenue numbers yet. But management is "encouraged" so far, Needham analyst Joseph Stringer said in a client note. He noted the J-code (billing code) for insurance will be available on Oct. 1, which should help reimbursement.
Meanwhile, Oppenheimer's Biegler says the dominoes are lining up for a strong launch.
"Enthusiasm around PrEP couldn't come at a better time," he said.
A recent Supreme Court ruling in the case of Kennedy v. Braidwood removed potential headwinds tied to patient cost-sharing for preventive services. And the European Commission is expected to make an approval decision on twice-yearly Yeztugo by the end of the year.
Notably, Gilead's oral PrEP option, Descovy, generated $653 million in sales, smashing forecasts and shooting 35% higher year over year. Biegler called it "an impressive beat," and raised his price target on Gilead stock to 128 from 125.
Why Yeztugo Isn't An Automatic Win
RBC Capital Markets analyst Brian Abrahams estimates $173 million in Yeztugo sales this year as more patients switch from Descovy. That's above the broader Street view for $135 million.
It's important to note, the Medicaid market accounts for 20% of Gilead's HIV-tied revenues. The Trump administration is pushing ahead with its Most Favored Nation approach to drug prices in the U.S., with a focus on Medicaid.
"Though Medicaid exposure for the HIV franchise is in the low 20% and pricing in that channel is likely already low, given that our price est. for EU is less than half of blended U.S. pricing, we could see some pressure if MFN policies get enforced," he said in a client note.
Gilead could price Yeztugo in Europe on par with prices in the U.S. But that could hamper the effort to build a PrEP market in Europe.
And, though the Supreme Court ruling fell in Gilead's favor, Health Secretary Robert F. Kennedy Jr. is restructuring the U.S. Preventative Services Taskforce, which could eventually decide to eliminate the mandate that insurance companies must pay for preventive services without cost sharing.
"Though GILD noted solid PrEP growth pre-USPSTF suggests any impact could be manageable," Abrahams said.
He kept his sector perform rating on Gilead stock, but hiked his price target to 98 from 96.
Is There A Safe Biopharma Name?
Evercore ISI analyst Umer Raffat looked at the bigger picture. With setbacks for major names including Eli Lilly, Novo Nordisk and Vertex Pharmaceuticals, investors are looking for a place to hide and enjoy fund flows.
"Gilead has a very interesting setup here," he said in a report.
He noted Gilead is expected to be a mid single-digit growth story with the vast majority of that growth coming from one product: Yeztugo. The company also isn't facing any patent cliffs in the next several years, meaning growth is durable.
For the year, Gilead expects $28.3 billion to $28.7 billion in total product sales, which excludes revenue from licensing and collaboration agreements. The new guidance is up $100 million from the outlook Gilead issued three months ago, though it indicates a slight year-over-year decline in sales.
Raffat also notes the peak earnings per share estimate is $11. But there could also be upside to this.
This year, Gilead calls for $7.95 to $8.25 a share in adjusted earnings. At the midpoint, that's up 20 cents per share from Gilead's previous guidance. Earnings would power more than 75% higher vs. 2024.
Gilead's Second-Quarter Beat
All of this comes on the back of a second-quarter beat.
During the June quarter, the biotech giant earned an adjusted $2.01 per share on $7.08 billion in sales. Earnings were flat year over year, but topped analysts' call for $1.96, according to FactSet. Sales edged 2% higher and narrowly beat expectations for $6.98 billion.
Notably, Gilead's biggest moneymaker, HIV drug Biktarvy, brought in $3.53 billion in sales, up 9% and above forecasts for $3.38 billion.
Promisingly, sales of cancer drug Tecartus beat expectations at $92 million. Trodelvy brought in $364 million in sales, growing almost 14% and beating calls for $340 million. But Yescarta came up short at $393 million. Analysts called for a slightly stronger $398 million.
Veklury, Gilead's Covid treatment, also came in short at $121 million. Analysts projected $200 million. But it's important to note that it's hard to project sales of Covid-tied items, especially during the summer months.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
