Generic Sovaldi For Poor Countries is 'Nothing New', Says RBC (GILD)

RBC Capital maintained an Outperform rating on Gilead Sciences (NASDAQ: GILD) with a price target of $115. Analyst Michael J. Yee discussed today's weakness in the stock, linking it to reports of a cheaper version of Sovaldi offered in poor countries. In his view this is "nothing new."

"Based on our conversations with investors, we believe recent weakness this morning (stock was down as much as 8% intraday) was attributable to at least one media article and headline discussing a "cheaper version" of GILD's Sovaldi coming soon and another discussing already-known bear arguments. However, the article on a cheap Sovaldi is discussing a potential upcoming deal with generic manufacturers to make generic or low-cost Sovaldi available to poor countries around the world and is nothing new and is something they already do with HIV pills and already expected," said Yee.

"Some investors have also been speculating on what the price of the new all-oral combo might be after a mgmt presentation and comments this week, and what pricing is good or bad for investors and for the stock. We understand that theoretically, GILD can price the new all-oral at a very high price given payors already pay for GILD+JNJ separately and that 2- pill regimen is as high as $130,000. We think GILD will price the new alloral around $90-100k which is a slight premium, yet highly justifiable and is below what the current best regimen is (GILD+JNJ). What's also very important to remember - is GILD is likely to be approved at either 8 weeks or 12 weeks so 12 weeks (3 bottles) could be $90-100k but that means 8 weeks is 2 bottles and only $67k - in effect already a big price cut based on a shorter regimen where docs think perhaps 50% of pts might use. Thus "blended" pricing of 8/12wks would average around $84k again," 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 $106.86 yesterday.

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