Gilead: Incorporating Longer Biktarvy Runway

Key Morningstar Metrics for Gilead Sciences

• Fair Value Estimate: $125.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

On Oct. 6, Gilead Sciences GILD announced a settlement with three generic manufacturers, securing an agreement for them not to launch a generic version of the firm’s HIV drug Biktarvy in the United States until at least April 1, 2036.

Why it matters: Biktarvy is roughly half of Gilead’s annual total revenue, and we previously assumed the company could face generic competition following the expiration of its December 2033 composition of matter patent.

The bottom line: We’re raising our fair value estimate to $125 per share from $115 for wide-moat Gilead, as we’re assuming US Biktarvy will now grow at a low-single-digit rate over our 10-year explicit forecast, with the exception of a potential 2028 Medicare pricing hit. We think shares look relatively fairly valued.

• We still assume roughly $4 billion in annual sales of new HIV prevention drug Yeztugo by the end of our 10-year explicit forecast period, and we think prospects for developing the international market for HIV prevention look promising. We assume one-third of these sales come from outside the US.
• We’re watching for HIV pricing pressure in the midterm. Medicaid spending cuts in the “One Big Beautiful Bill Act” could lead to HIV patients moving from Medicaid to even lower-priced AIDS drug assistance programs in 2027, and Biktarvy Medicare negotiation could hit in 2028.

Coming up: We’re awaiting third-quarter results to see the initial success of the Yeztugo launch in the US as well as any potential agreement with the Trump administration on drug pricing concessions.

• Following Pfizer’s agreement with the administration on Sept. 30, we expect other large pharmaceutical firms to follow suit, although Gilead remains among those least exposed to potential tariffs, due to its heavy focus on US manufacturing and sales.
• That said, Medicaid price concessions could be more of a headwind for Gilead, given that this channel is more than 20% of its HIV treatment business and 10%-15% of its HIV prevention business in the US.