Gilead Strikes Deal with CVS, Hits Back AbbVie

Gilead Sciences (NASDAQ:GILD) took a hit a few weeks ago when healthcare provider Express Scripts (NASDAQ:ESRX) chose AbbVie’s (NYSE:ABBV) hepatitis C drug over that of Gilead’s for exclusive distribution to its 25 million subscribers. Gilead produces Harvoni while AbbVie produces Viekira Pak, and the two compete as therapies for hepatitis C. Since January 1st, Express Scripts beneficiaries have only been able to purchase AbbVie’s Viekira Pak.

However, the tables turned yesterday on January 5th when Gilead made a deal with CVS Health Corp. Gilead and CVS reached a deal in which CVS will exclusively offer Gilead’s hepatitis C drugs. Gilead’s Harvoni will be on CVS’s preferred drug list and accessible for customers using the Affordable Care Act, Medicaid, and parts of Medicare. CVS customers will be able to finish current regimens of Viekira Pak but will need prior authorization to continue its use in the case of medical exceptions.

Analyst Robyn Karnauskas of Deutsche Bank weighed in, noting that Express Scripts controls about one third of the US pharmacy while CVS controls slightly less. Karnauskas reiterated a bullish rating on Gilead on January 5th with a price target of $125. She has a 71% overall success rate recommending stocks from the past year with a +13.0% average return per recommendation.



On January 5th, analyst Cory Kasimov of J.P. Morgan maintained an Overweight rating on Gilead Sciences, though he did not provide a price target. Kasimov is happy about the “positive, albeit unsurprising, development for GILD following the exclusion of its drugs from ESRX’s formularies” because he felt fears surrounding “GILD’s longer term market share” were becoming “overblown.” However, Kasimov qualified, “we do still expect these exclusive deals will come at the expense of price (via gross-to-net adjustments).” The analyst concluded, “While we acknowledge noise around pricing/formularies could cause some volatility, we still see GILD as well positioned with potential for longer term optionality driven by its immense cash flow generation.”

Cory Kasimov has a 50% overall success rate recommending stocks from the past year with a +16.6% average return per recommendation.


Separately on January 5th, analyst Phil Nadeau of Cowen maintained an Outperform rating on Gilead Sciences with a price target of $125. Nadeau noted, that “Third party sources” reported on January 1st that Gilead raised the prices of several drugs… We think that investors’ concerns over the pricing power of GILD, and the biopharmaceutical industry, have been overblown.” He concluded, “There is little to suggest that biopharmaceutical companies have begun to regularly compete on price in crowded or mature markets. Therefore, we continue to expect pricing will remain a driver of top- and bottom-line growth for Gilead specifically, and the biopharmaceutical industry more generally, for the foreseeable future."

Phil Nadeau has a 63% overall success rate recommending stock from the past year with a +11.8% average return per recommendation.



On average, the top analyst consensus for GILD on TipRanks is Moderate Buy.