Gilead (GILD): Goldman Survey Shows Physicians Remain Sensitive to Price (ABBV)

Goldman Sachs maintained a Neutral rating on Gilead Sciences (NASDAQ: GILD) and trimmed its price target to $77.00 (from $82.00). AbbVie Inc. (ABBV) remains CL-Buy with a price target of $60. Comments follow a hepC survey. Analyst Terence Flynn said physicians remain sensitive to price and will increase their use of AbbVie's regimen if it’s less expensive.

"Our total addressable market (TAM) analysis reveals that for GILD to achieve our and consensus’ 2014-2019 hepC sales either (1) every hepC patient under care in US, EU5 and Japan must receive GILD’s drugs or (2) the market must expand to compensate for likely share gains from ABBV (WW) and BMY (Japan) (NYSE: BMY). Next-gen hepC regimens are likely to be in focus heading into the EASL hepC conference later this week and we expect more details from GILD and MRK (NYSE: MRK)," said Flynn.

"Sovaldi is off to a very strong launch based on our physician survey as well as recent IMS data. Our survey also points to a similarly strong launch for GILD’s Sovaldi/’5885 combo as awareness is high (76% of physicians aware) and that GILD’s regimen could capture 70% market share vs. 30% for ABBV, but price will clearly play a role. We are raising our near-term Sovaldi estimates, but our 12-month price target decreases to $77 from $82 as we lower our terminal growth rate to 0% from 1% in our DCF to reflect declining outer year sales. Our work reinforces our view that expectations remain high for GILD’s hepC franchise, keeping us at Neutral," continued the analyst.

"ABBV (CL-Buy): pricing sensitivity leaves room for upside Two takeaways from the survey: (1) Physicians are more excited about ABBV’s regimen than Wall Street, with 30% expecting to use it if priced at par with GILD, versus consensus which assumes 10-15% of the market. (2) Physicians remain sensitive to price and will increase their use of ABBV regimen if it’s less expensive. By our estimates, hepC represents $5 in
NPV," he added.

For an analyst ratings summary and ratings history on Gilead Sciences click here. For more ratings news on Gilead Sciences click here.

Shares of Gilead Sciences closed at $70.01 yesterday.

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