Gilead Sciences

Gilead reported second-quarter revenue growth of 10%, but acquisition charges pushed the firm to a net loss. Management slightly raised its 2026 product sales guidance midpoint from $30.2 billion to $30.25 billion.

Why it matters: Despite lower demand for Gilead's cell therapy products and covid treatment Veklury, steady HIV treatment demand and injectable and oral HIV prevention options drove growth in the quarter. Gilead's core HIV business grew 12%, including roughly a doubling in sales for HIV prevention products Descovy and Yeztugo, and management sees 9%-10% HIV growth for the full year.

The bottom line: We're maintaining our $131 fair value estimate for wide-moat Gilead, and we see shares as fairly valued at recent prices. Yeztugo's launch in HIV prevention is in line with our expectations, and we're encouraged by the product's potential weekly oral launch in 2027. Positive results for the liver disease drug Livdelzi and the weekly oral HIV treatment (partnered with Merck) islatravir/lenacapavir, as well as the expanded approval of Trodelvy for first-line triple-negative breast cancer, look poised to support mid-single-digit top-line growth over the next few years. Under our updated discount-rate framework, we've raised our Gilead WACC estimate to 7.3% from 7.1%. Our beta of 0.6 reflects our view of both biopharma's defensive nature and Gilead's own fundamentals and market returns.

Long view: In oncology, we're bullish on the potential of Gilead's cell therapy Anito-cel, likely to launch in December for multiple myeloma, although we're keeping an eye on competition to Trodelvy (26% growth in the quarter), particularly from Merck's own antibody-drug conjugate sac-TMT.

For more information on Gilead's portfolio and pipeline, please see our recent in-depth report, 'Biopharma Product Pipelines Rise to Meet Steeper Patent Cliffs.'

We’re maintaining our fair value estimate at $131.

We think Gilead's HIV business could plateau at around $23 billion by 2030, with TAF-based combination regimens (Biktarvy, Genvoya, Descovy, and Odefsey) offsetting declines from older drugs. Biktarvy's selection for Medicare negotiations beginning in 2028 could also lower Biktarvy's sales prior to the patent expiration. The CymaBay acquisition brings liver autoimmune disease drug seladelpar (Livdelzi), which we expect to have sales above $1 billion annually. In covid, we assume Veklury remains below $1 billion for the foreseeable future. We assume Gilead's HCV business will gradually shrink from $1.6 billion in 2025 to below $1 billion over the next several years.

In oncology, we think Yescarta/Tecartus sales will remain between $1 billion-$2 billion annually despite slight erosion of market share in second-line DLBCL therapy and other forms of blood cancer, as the competitive landscape gets tougher. We include a potential launch of anito-cel in 2026 with sales growing to more than $4 billion by the end of our 10-year forecast. The Immunomedics deal should give Gilead solid footing in oncology and a significant boost to top-line growth, but it came at a high price; we assume Trodelvy sales could surpass $4 billion if approved in multiple indications by the early 2030s.

Under our updated discount-rate framework, we've raised our Gilead WACC estimate to 7.3% from 7.1%. Our beta of 0.6 reflects our view of both biopharma's defensive nature and Gilead's own fundamentals and market returns. The change does not reflect a new view of the business, but a more granular expression of our existing risk assessment.

We assume a long-term tax rate of 20%.

We assign Gilead a wide economic moat rating. We think patent protection on newer HIV regimens, continued dominance in the hepatitis C market, and growth from oncology-focused additions to its portfolio will be enough to ensure strong returns for the next couple of decades. Gilead's expertise in infectious diseases and single-pill formulations is a part of its research and development strategy, which we see as one of the strongest intangible assets supporting the firm's wide moat. Progress expanding the firm's oncology franchise could also add another pillar of support.

We think the firm does face environmental, social, and governance risks, particularly related to potential US drug price-related policy reform (Gilead sees more than 70% of its sales from the US pharmaceutical market) and ongoing potential for product governance issues (including litigation). While we have factored these threats into our analysis, we don't see them as material to our valuation or moat rating.

Gilead's moat was formed by its leadership position in the treatment of HIV, with patented products that form the backbone of today's treatment regimens. Despite numerous competitors, the company has established leading market share and spectacular profitability with its convenient, effective, and safe treatments. We estimate that Gilead holds a more than 60% share of the $30 billion global branded HIV market. Management has done an excellent job of maximizing sales of the TDF molecule, which is present in Viread, Truvada, Atripla, Complera, and Stribild. Gilead has now refreshed its portfolio with combination regimens containing TAF instead of TDF, which improved the kidney and bone safety profile of these chronic treatments. Genvoya set a record as the fastest HIV combination pill sales ramp, only to have that record broken by Gilead's latest regimen Biktarvy, which has the advantage of containing an integrase that does not require a booster (boosters can interact with other drug treatments and make therapy more complex). Biktarvy rapidly became the preferred regimen in 2018 and has protection from generic launches in the US until 2036. Gilead can also retain virtually all of the economics behind its HIV sales of its newest combination pills, rather than sharing with a partner as it does for Complera (Johnson & Johnson) and Atripla (Bristol Myers Squibb), benefiting the firm's return on invested capital.

In HIV prevention, Gilead first gained approval of Truvada, but was able to retain a significant number of patients on branded treatment following patent expiration by switching focus to TAF-based Descovy, which still retains more than 40% of the HIV prevention market in the US. Gilead also launched an every-six-month injectable, Yeztugo, in mid-2025 in HIV prevention, which we think could improve compliance and offer a more convenient way to prevent infection. Lenacapavir (the molecule in Yeztugo) is also in testing as a treatment in various new combinations, which we think could extend treatment sales beyond Biktarvy.

Gilead has also shown that it can translate its extensive understanding of the drug discovery and development process in HIV into new therapeutic areas. Despite initial criticism of the high price that Gilead paid for Pharmasset in early 2012, the $11 billion acquisition gave Gilead the most valuable hepatitis C drug in the industry and also demonstrated the firm's ability to recognize the potentially unique nature of Sovaldi's safety and efficacy profile compared with other, toxic nucleotide analogs. We think the firm's experience with another nucleotide analog, tenofovir, a key ingredient in all of Gilead's HIV combination regimens, probably contributed to its recognition of Sovaldi's value at an early stage in its development. The molecule in Sovaldi and Harvoni redefined Gilead as a powerhouse in the broader infectious disease market. Despite HCV market declines as patients are cured, Gilead and competitor AbbVie still split the global market relatively evenly.

Gilead's oncology pipeline is also growing and advancing. The first significant boost was from the acquisition of Kite in 2017 and its CAR-T cell therapy Yescarta, and the drug has since expanded into new indications and earlier lines of lymphoma treatment, contributing to roughly $2 billion in 2024 CAR-T sales for Gilead, although competition has weighed on sales since. The recent acquisition of Arcellx's CAR-T cell therapy anito-cel (multiple myeloma) could support a promising new launch in late 2026, and we include more than $4 billion in annual sales for this therapy by the end of our 10-year forecast. Immuno-oncology deals in 2020, including the acquisitions of Forty Seven and Immunomedics and collaboration with Arcus have had mixed results, but created potential future avenues for oncology growth. The Forty Seven acquisition added CD47 antibody magrolimab to the pipeline, which failed in trials as a blood cancer treatment. The Immunomedics acquisition brought approved breast cancer drug Trodelvy, which is seeing expanded use in breast cancer and is being tested in endometrial and small cell lung cancer; we assume Trodelvy will generate $2.5 billion in annual sales by 2030. We think smart acquisitions and the potential for future combination regimens in oncology are further diversifying the firm and strengthening its intangible assets.

Gilead markets several single-tablet regimens for HIV, and its next-generation products with better long-term safety profiles, led by Biktarvy, are boosting the company's market share.

Guidelines that aim to improve diagnosis and treatment rates, and new prophylaxis use, provide strong tailwinds for growth in HIV.

Gilead's pipeline could begin to see more blockbuster launches, particularly if anito-cel can steal market share from J&J's Carvykti in multiple myeloma beginning in late 2026.

Gilead's Yeztugo is a promising new HIV prevention drug, but it is unclear if markets outside the US will embrace this form of therapy.

Gilead's HCV cures shrank the population needing treatment, and competing hepatitis C regimens gave PBMs the ability to negotiate aggressively, whittling away the size of Gilead's HCV market.

Gilead's late-stage failures in MASH and immunology put pressure on the oncology portfolio for growth.