Gilead Earnings: Maintaining Our $97 Fair Value as Long-Term HIV Sales Potential Looks Undervalued

We’re maintaining our $97 fair value estimate for wide-moat Gilead following second-quarter results that were in line with our expectations on the top line, but exceeded our expectations on the bottom line as a result of significantly lower clinical trial costs and discontinued clinical programs. Gilead’s revenue grew 5% with broad-based growth from HIV (3%), liver disease (17%), and oncology (15%). HIV treatment regimen Biktarvy grew 8% as it continues to dominate the market and remains the biggest driver of Gilead’s sales (46% of product revenue). We think Biktarvy’s long patent life (2033) and Gilead’s innovation in HIV offer the most encouraging support for the firm’s wide moat, with further potential from higher-risk programs in oncology as well as some smaller potential sales from effective hepatitis D and liver autoimmune disease. We think shares look undervalued, particularly given the impressive recent HIV prevention data for lenacapavir and a large opportunity to help a broader group of individuals prevent infection.