- Cowen is adding Gilead to their Focus List, replacing Genzyme. Sales momentum of GILD's market-leading HIV franchise is very strong, and the firm projects the franchise will grow at a 21% CAGRfrom 2006-11. Moreover, GILD's prospects for long-term high-teens EPS growth are good. Although they project Tamiflu stockpiling will decrease, causing GILD's royalty revenue to decline from $433MM in 2007 to $200MM in 2009, they expect the lost revenue will be more than made up for by new product launches. Over the next 12-24 months COWN expects launches of Letairis (pulmonary hypertension, ongoing), Viread in HBV (2008), aztreonam lysine (cystic fibrosis, 2008), and GS 9137 (HIV, 2009).
Firm's model projects GILD will have a 16% EPS CAGR for the period of 2006-11, with consistent 16-17% EPS growth for the years 2009-11. Despite these strong fundamentals, GILD looks attractively valued, trading at 22x 2008 pro forma EPS est., in line with the biotech group average. They think the shares will outperform the market by 20% over the next 12 months. Firm believes GILD's fundamentals are second to none in large cap biotech.
- Piper Jaffray is out saying they had mistakenly concluded in a previous note that GILD had abandoned efforts to obtain a composition of matter patent covering Truvada (10/757,141) - the firm has now found a mirror image patent application for Truvada that remains under review (10/540,794). The patent application under review would extend the patent protection of Truvada until at least January 2024 (current protection for Truvada lasts through 09/2021 under the Emtriva patent).
Extrapolating their 2010 total Truvada use (Truvada + the Truvada portion of Atripla) to 2021, the additional three years potentially gained through the new Truvada patent would add at least $1-$2/share in NPV to the GILD valuation. Maintains Outperform.
Notablecalls: Cowen's call makes sense. GILD continues to gain share among the HIV treatments due to the once/twice a day pill regimen. Barron's was out positive on GILD over the weekend, but the stock was chopped down after open Monday. Being added to the Focus List at Cowen may provide another chance for the bulls to push the stock higher. Will see if it sticks.
GILD 1-yr chart: