Gilead Earnings: Maintaining Our $97 Fair Value Estimate Following Third-Quarter Outperformance

Gilead's third-quarter results were significantly higher than our expectations, including 7% top-line growth largely due to 9% growth for covid drug Veklury due to higher covid hospitalizations in the quarter as well as solid demand for Gilead’s key HIV products, Biktarvy (13% growth) and Descovy (15% growth). Management raised its 2024 guidance, implying HIV sales growth for the year of roughly 5% (up from 4%), and also lower research and development spending due to failed trials of blood cancer drug magrolimab and covid drug obeldesivir. However, sales of Gilead’s cell therapies were essentially flat due to increased competition in the US from other cell therapies as well as new bispecific antibody lymphoma therapies, and we’ve slightly reduced our long-term expectations for Yescarta as a result. We’re maintaining our $97 fair value estimate for Gilead and continue to see Biktarvy’s long patent life (2033) and Gilead’s innovation in HIV as the most encouraging supports for the firm’s wide moat. We think the shares are fairly valued after rising with recent impressive HIV prevention data for lenacapavir and a large opportunity to help a broader group of individuals prevent infection.