Morgan Stanley reiterates overweight rating on Gilead Sciences stock

Morgan Stanley reiterated its Overweight rating on Gilead Sciences (GILD) with a $135 price target, citing the potential of its biannual HIV PrEP injectable, lenacapavir (LEN), which is expected to gain FDA approval by June 2025; analysts project LEN sales to reach $184 million in 2025 and $760 million in 2026. Additionally, Gilead's Trodelvy showed positive results in trials for triple-negative breast cancer, while the company agreed to a $202 million settlement in a civil fraud lawsuit.

Analysis

Morgan Stanley reiterated its Overweight rating and $135 price target for Gilead Sciences, underscoring the significant commercial potential of its HIV pre-exposure prophylaxis (PrEP) candidate, lenacapavir (LEN). As a biannual injectable, LEN offers a less frequent dosing regimen and has demonstrated positive outcomes in two Phase 3 trials conducted in 2024, with an anticipated U.S. FDA approval by June 19, 2025, and a commercial launch projected for summer 2025. Morgan Stanley analysts project LEN PrEP sales to reach $184 million in 2025 and $760 million in 2026, figures that surpass current consensus estimates. Gilead's financial health, as indicated by InvestingPro data, includes a $135.5 billion market capitalization, impressive 78% gross profit margins, $28.7 billion in revenue over the last twelve months, consistent dividend growth over the past decade, moderate debt levels, and strong cash flows sufficient to cover interest payments. The company's strategy for LEN involves converting a substantial portion of the over 400,000 U.S. adults currently on PrEP, alongside market expansion into new segments and geographies, highlighted by the current disparity in Descovy's international sales ($200 million) versus U.S. sales ($1.9 billion). Further pipeline development includes a once-yearly LEN formulation for PrEP, expected to enter Phase 3 trials in the second half of 2025, with a potential regulatory filing in 2028. Beyond HIV, Gilead's oncology portfolio is strengthened by positive results from its drug Trodelvy in triple-negative breast cancer, where the ASCENT-04 trial showed a 35% reduction in the risk of disease progression or death in PD-L1-positive metastatic TNBC patients. While Gilead recently agreed to a $202 million settlement in a civil fraud lawsuit, InvestingPro's Fair Value analysis suggests the stock is trading near its fair value, with analysts maintaining positive expectations for future earnings growth.

Key Decisions for Investors

• Investors should evaluate Gilead's growth prospects driven by lenacapavir's potential to exceed current sales consensus, considering its differentiated dosing and strong Phase 3 data.
• Key catalysts to monitor include the FDA's decision on lenacapavir for PrEP by June 19, 2025, the subsequent commercial execution, and progress on the once-yearly formulation.
• While the recent $202 million legal settlement resolves an overhang, ongoing assessment of pricing, reimbursement coverage, competitive landscape for lenacapavir, and the performance of the expanding oncology pipeline, including Trodelvy, remains crucial for investment decisions.