Raising Gilead FVE to $81 on HIV Growth Opportunities

We're raising our Gilead GILD fair value estimate to $81 per share from $77 following solid fourth-quarter results, as we've raised our estimates for Biktarvy heading into a potential pandemic recovery year and also boosted our estimates for HIV pipeline drug lenacapavir. With multiple oncology data readouts expected in 2021, we think there are many opportunities for Gilead to begin to see meaningful top- and bottom-line growth, excluding volatility in sales around COVID-19 therapy Veklury. We see Gilead's wide moat as stable, supported by a solid HIV franchise, expansion in several forms of hepatitis, and a substantial oncology pipeline.

Biktarvy and HIV prophylaxis potential drive the increase in our fair value estimate. Despite our expectation for potential additional pricing pressure on Descovy in 2021, as Gilead negotiates to maintain coverage in the face of Truvada generics, we think increasing COVID-19 vaccinations could reduce the pandemic-related headwinds on new patients seeking HIV prophylaxis, countering this pressure. We also remain impressed by Biktarvy's expansion despite the pandemic, and we've boosted our near-term sales assumptions for the drug. Capsid inhibitor lenacapavir could see approval by 2022 in heavily pretreated HIV patients, and we've increased our long-term estimates for the drug to factor in both treatment potential (to enter trials in 2022 in combination with a yet-to-be-determined drug, part of a once-weekly oral regimen or an every-six-month injection) and potential as a prophylaxis regimen (as a single agent every six months, with phase 3 starting in 2021).

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