Gilead Sciences said Monday its drug, Trodelvy, failed to pass muster in a study of patients with a common form of lung cancer, and GILD stock toppled.
The company pitted its blockbuster hopeful, Trodelvy, against chemotherapy in patients with advanced or metastatic non-small cell lung cancer. Though the drug showed promise, it didn't meet Gilead's bar for success: improvement in overall survival, or how long a patient lives before dying of any reason.
Evercore ISI analyst Umer Raffat says the drop-off in GILD stock is an overreaction. This was already a high-risk study after AstraZeneca reported a similar failure.
"The reason to like Gilead is that it's a long-term growth story — driven by HIV (not oncology) — and that remains fully intact," Raffat said in a report. "In that vein, and knowing that AstraZeneca trial had already cast doubts on this Gilead study, I think 10% is an overreaction."
On today's stock market, GILD stock slumped 10.2% to close at 78.43. Shares had been forming a cup base with a buy point at 89.74, but dropped below the lower bounds of it, according to MarketSmith.com.
GILD Stock Gives Back Gains
Trodelvy is an important drug for Gilead. Analysts expect it to generate $1.06 billion in 2023 sales, an increase of 56% over 2022 sales, according to FactSet. It's the second biggest moneymaker in Gilead's cancer franchise, trailing only Yescarta.
But increasing Trodelvy sales depends on expanding its uses. Today, Trodelvy can treat some breast cancer patients and some forms of bladder or urinary tract cancer.
Trodelvy works by targeting a protein called Trop-2, similar to AstraZeneca and Daiichi Sankyo's drug that also failed in lung cancer treatment. Yuri Khodjamirian, chief investment officer for Tema ETFs — issuer of the Tema Oncology exchange traded fund — says Gilead's results are actually to the benefit of AstraZeneca and Daiichi Sankyo, suggesting their drug is more powerful.
Further, the results could bolster Merck, which testing another Trop-2-directed drug with a potentially safer profile.
"The press release suggests that Gilead could struggle getting a label expansion into lung cancer, or at best, be unable to garner meaningful share in lung," he said in an email to Investor's Business Daily.
Trodelvy's Promise For Some Patients
Promisingly, patients who previously didn't respond to an immuno-oncology drug in the same class as Merck's Keytruda showed a median three-month improvement in overall survival. Now, Gilead says it's planning to explore the role Trodelvy could play in helping these patients.
RBC Capital Markets analyst Brian Abrahams says Gilead's Trodelvy could still capture some of the market "if regulators are compelled by Gilead's ongoing subgroup analysis."
He also sees a potential for Trodelvy in previously untreated non-small cell lung cancer patients. But Gilead won't have data from that study until 2025.
Abrahams kept his sector perform rating and 78 price target on GILD stock.
"We believe the stock had run up into the data," he said in a report. "We expect the news today to lead shares to give back some of the recent gains. We continue to view shares as not overly expensive given the stable HIV franchise and oncology optionality, though still see the stock as lacking compelling near-term upside catalysts."
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