Making Sense of Gilead’s Recent Stock Drop: A Closer Look at Trodelvy’s Setback
In a surprising turn of events, Gilead Sciences recently faced a setback with its drug Trodelvy, resulting in a 10% drop in GILD stock. The drug, intended for patients with a common form of lung cancer, fell short in a crucial study, causing concerns among investors and sparking discussions about the significance of this development. Let’s dive into the details to understand if the market’s reaction is an overreaction or a warranted response to the latest news.
The Unraveling Situation:
On Monday, Gilead Sciences announced that Trodelvy did not meet the expected success criteria in a study involving patients with advanced or metastatic non-small cell lung cancer. Despite showing promise, the drug did not demonstrate a significant improvement in overall survival, a key benchmark for success in the pharmaceutical industry.
Analyst Insights:
Evercore ISI analyst Umer Raffat argues that the market’s reaction to the news might be an overreaction. Raffat points out that this study was inherently high-risk, especially after AstraZeneca reported a similar failure. Raffat emphasizes that Gilead’s long-term growth story, primarily driven by HIV treatments rather than oncology, remains robust.
Raffat’s perspective sheds light on the broader picture, suggesting that the 10% drop in GILD stock may be disproportionate to the actual impact on Gilead’s overall business outlook.
Stock Market Response:
On the stock market, GILD stock witnessed a 10.2% decline, closing at $78.43. The stock had been forming a cup base with a buy point at $89.74, but the recent news pushed it below the lower bounds of this potential breakout, as reported by MarketSmith.com.
Importance of Trodelvy for Gilead:
Trodelvy holds significance for Gilead, with analysts projecting it to generate $1.06 billion in sales by 2023. This represents a substantial increase of 56% over the 2022 sales figures. It stands as the second most lucrative asset in Gilead’s cancer portfolio, trailing only behind Yescarta.
The Drug’s Mechanism and Market Position:
Trodelvy operates by targeting a protein called Trop-2, similar to AstraZeneca and Daiichi Sankyo’s drug, which also faced setbacks in lung cancer treatment. While Gilead’s results are disappointing for the company, Yuri Khodjamirian, CIO for Tema ETFs, suggests that AstraZeneca and Daiichi Sankyo may benefit from Gilead’s challenges, hinting that their drug might be more potent.
Furthermore, the results might provide an opportunity for Merck, which is testing a Trop-2-directed drug with a potentially safer profile. The landscape of the pharmaceutical market is dynamic, and setbacks for one company can create opportunities for others.
Hope for Some Patients:
Despite the setback, there is a glimmer of hope. Trodelvy demonstrated promise for patients who had previously not responded to immuno-oncology drugs within the same class as Merck’s Keytruda. These patients showed a median three-month improvement in overall survival. Gilead now plans to explore how Trodelvy could play a role in helping these specific patients.
Analyst Projections and Future Outlook:
RBC Capital Markets analyst Brian Abrahams suggests that Trodelvy could still capture some market share, especially if regulators are persuaded by Gilead’s ongoing subgroup analysis. Abrahams also sees potential in using Trodelvy for previously untreated non-small cell lung cancer patients. However, data from that study won’t be available until 2025.
While the recent drop in GILD stock reflects the disappointment surrounding Trodelvy’s study results, analysts believe that the market reaction might be somewhat exaggerated. Gilead’s long-term growth story, anchored in its HIV treatments, remains a solid foundation. As the pharmaceutical landscape continues to evolve, setbacks and successes are integral parts of the journey. Investors will be watching closely for Gilead’s future strategic moves and the potential resurgence of Trodelvy in different capacities within the oncology landscape.
