Filgotinib CRL Is a Blow for Gilead Stock, Says J.P. Morgan; What’s Next?

Shares of pharma heavyweight Gilead Sciences (GILD) took a downturn in Wednesday’s session after the company received a CRL (complete response letter) from the FDA.

Gilead’s NDA (New Drug Application) for filgotinib, an investigational treatment for moderately to severely active rheumatoid arthritis (RA) was rejected while the FDA awaits more data from Gilead’s testicular tox studies (MANTA and MANTA RAY). These will determine whether filgotinib has an impact on sperm parameters. However, topline results aren’t expected until 1H21.

The FDA also raised concerns about the overall risk/benefit profile for filgotinib’s 200mg dose (both 200 and 100mg doses were evaluated in the Phase 3 trial).

J.P. Morgan analyst Cory Kasimov was taken aback by the news, describing them as a “near worst case scenario” and nothing less than a “shock.”

Going by Gilead’s assertion in their 2Q earnings call that no Advisory Committee meeting was needed, Kasimov took the disclosure “as a favorable indicator.” However, looking back, Kasimov believes the ominous signs were there all along.

“Perhaps in hindsight this shouldn’t be all too surprising when considering the lack of transparency throughout the whole filgo regulatory process (i.e., no disclosure of filing acceptance, potential delays for unclear reasons announced in 1Q, and the unexplained decision to file in the US without the MANTA safety studies),” the 5-star analyst said.

The need for more data from the MANTA studies means the potential approval will be set back by at least a year, which will provide competitors with “another year in which to build on their market lead.” There is an additional implication to the CRL. Kasimov believes the “potential lack of dosing flexibility could impact filgotinib’s competitive profile.”

“Bottom line,” Kasimov said, “We suspect filgo numbers should come down quite a bit (we previously forecasted ~$2B peak), putting GILD’s ability to grow the topline line over the next couple years under even more pressure.”

Accordingly, Kasimov reiterated a Neutral (i.e. Hold) on GILD shares along with an $81 price target, which implies a 22% upside from current levels. (To watch Kasimov’s track record, click here)

Among Kasimov’s colleagues, opinions on Gilead’s prospects are evenly split. With 10 Buys, 11 Holds and a single Sell, Gilead has a Moderate Buy consensus rating. However, the bulls are in the driving seat, as the $78.50 average price target implies shares will rise nearly 19% over the next 12 months. (See Gilead stock-price forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.