Gilead selloff on UnitedHeath HIV promotion seen as unwarranted

Mizuho analyst Salim Syed believes shares of Gilead Sciences (GILD) are sliding due to UnitedHealth’s (UNH) announcement of a new program called My ScriptsRewards that will “try to convince plan participants to take a cheaper HIV regimen in return for $500 debit cards.” However, the analyst views the worries as unwarranted, noting that an “inferior drug” is the “common thread” between all of the regimens that UnitedHealth’s program pushes. MY SCRIPTREWARDS: UnitedHealthcare has introduced My ScriptRewards, a new program that shares prescription cost savings directly with plan participants who choose doctor-approved, guideline-recommended and cost-effective medications. According to the company’s website, My ScriptRewards offers UnitedHealthcare plan participants the opportunity to realize additional cost savings and earn up to $500 in prepaid debit cards to use toward medical expenses, including other prescriptions and doctor’s office copays, when they consult their doctor to choose the lower-cost regimen that is right for them. “Select antivirals used to treat HIV will be the first medications included in My ScriptRewards due to the challenges that come with managing a high-cost medical condition. There are several HIV treatment regimens recommended by the Department of Health and Human Services, yet the cost among them can vary significantly. Through My ScriptRewards, plan participants can receive certain guideline-recommended HIV medications with proven effectiveness for no cost at the time of purchase,” the company stated. The most cost-effective treatment regimens available through UnitedHealthcare for $0 out of pocket include Cimduo plus Tivicay and Cimduo plus Isentress/Isentress HD. CONCERN SEEMS UNWARRANTED: In a research note to investors, Mizuho’s Syed blamed UnitedHealth’s introduction of the new program for weakness in shares of Gilead. However, the analyst argued that the worries appear unwarranted as Cimduo is the “common thread” between all of the regimens that UnitedHealth’s program calls out and it is an inferior drug to Gilead’s Biktarvy. Biktarvy is the backbone of the number one recommended regimen according to HHS treatment guidelines, noted Syed, who reiterated a Buy rating and $94 price target on Gilead shares. Voicing a similar opinion, Evercore ISI analyst Umer Raffat also attributed the pullback on Wednesday in shares of Gilead to concerns over the company’s HIV franchise given UnitedHealth’s promotions of cheaper alternatives. The analyst told investors in a research note of his own that he does not see risk to Gilead’s sales from the promotions. UnitedHealth’s is proposing a switch to two separate tablets, which is not in the HIV guidelines today, he contended. Raffat reiterated an Outperform rating on Gilead shares. PRICE ACTION: In afternoon trading, shares of Gilead have dropped about 5% to $68.65.

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