After Disappointing Data, We Lower FVE for Gilead

We're lowering our Gilead GILD fair value estimate to $77 per share from $79 following disappointing data for remdesivir as a treatment for COVID-19 and Galapagos' osteoarthritis drug candidate GLPG1972 (Gilead holds an option on U.S. rights). We think the shares look slightly undervalued at recent prices, and we continue to think that Gilead's HIV portfolio and immunology and oncology pipelines warrant a wide moat rating. However, the firm is clearly in a transitional phase as it digests large oncology deals like Forty Seven and Immunomedics, and if these deals fail to generate blockbuster oncology therapies that allow Gilead to gain a foothold on the market, we could see some erosion of the firm's competitive advantages.

We're lowering our remdesivir sales estimates to $1.9 billion in 2020 (from $3 billion) and below $1 billion in 2021 following mixed data from recent studies. While we still think the drug can benefit patients and will continue to be used under its emergency use authorization from May, we expect usage to decline significantly following publication of the Solidarity data. This is particularly true as we see the landscape for alternative treatments improving, ranging from generic steroid dexamethasone (the only treatment to have shown a survival benefit) and the advancement of several other potential treatments, particularly targeted antibody therapies from Regeneron/Roche, Lilly/Amgen, and AstraZeneca.

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