Patent Extension And Policy Decisions Will Drive Access To Advanced Therapies

Key Takeaways

• New product launches and expanded global access are driving revenue growth and improving Gilead's product mix, reducing reliance on legacy drugs.
  
• Strong cash flow and disciplined expense management enable share buybacks and margin expansion, supporting sustainable earnings and capital returns.
  
• Heavy reliance on HIV therapies and exposure to regulatory, patent, and competitive risks threaten Gilead's long-term revenue growth and profitability despite pipeline diversification efforts.

Catalysts

A biopharmaceutical company, discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.

• Demographic changes are expanding Gilead's end-markets, as a growing global population living with chronic conditions (like HIV and cancer) creates sustained demand for advanced therapies and prevention, supporting multi-year revenue growth (evidenced by high double-digit growth in HIV prevention/treatment and robust pipeline advancements).
  
• The company is leveraging increasing healthcare access and spending across geographies, highlighted by new product launches and expanded access/partnerships for Yeztugo (lenacapavir) in both developed and emerging markets-expected to materially boost international revenues and contribute to top-line acceleration.
  
• The launch and scaling of innovative products (Yeztugo, Trodelvy first-line, Livdelzi) position Gilead to deliver a more favorable product mix and premium pricing, driving higher gross margins and improving long-term earnings trajectory as portfolio diversification reduces overexposure to legacy products.
  
• Disciplined operating expense management and expanded share buybacks backed by strong free cash flow are increasing efficiency, supporting progressively higher operating margins and EPS growth; updated guidance reflects confidence in operating leverage and capital returns.
  
• An expanded pipeline in oncology, cell therapy, and next-generation HIV regimens set Gilead up for multiple new product launches by 2030, pointing to a prolonged innovation cycle likely to increase recurring revenue and insulate long-term earnings from generic erosion.

Gilead Sciences Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Gilead Sciences's revenue will grow by 3.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 21.9% today to 31.0% in 3 years time.
• Analysts expect earnings to reach $10.0 billion (and earnings per share of $8.08) by about September 2028, up from $6.3 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $8.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.7x on those 2028 earnings, down from 22.8x today. This future PE is greater than the current PE for the US Biotechs industry at 15.3x.
• Analysts expect the number of shares outstanding to decline by 0.44% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Gilead Sciences Future Earnings Per Share Growth

Risks

• Policy and pricing headwinds pose long-term risk: Ongoing and potential new government regulations (e.g., Medicare Part D redesign, Medicaid MFN proposals, legislative changes) could further compress realized prices and cap long-term revenue growth-even as HIV demand increases globally.
  
• Key products face future patent cliffs: Management highlights limited patent exposure until 2033, but after this period, Gilead's reliance on blockbuster HIV drugs like Biktarvy and Descovy exposes it to generic competition, threatening base business revenues and margins as exclusivity ends.
  
• Heavy dependence on HIV leaves earnings vulnerable: While launching new products (e.g., Yeztugo) expands the portfolio, the company's substantial earnings reliance on HIV therapies subjects it to risk from shifting treatment paradigms, technological disruption (such as potential new long-acting or curative therapies), and competitive launches, potentially undermining long-term revenue resilience.
  
• Execution risk in pipeline diversification and market access: Success of new launches in oncology (Trodelvy, anito-cel) and international PrEP markets is not guaranteed-delays in regulatory approvals, slower-than-expected uptake due to prescriber or logistical barriers, or reimbursement/access challenges (mentioned for Europe and low/middle-income countries) could constrain future revenue growth and profitability.
  
• Increasing industry competition and R&D cost pressure: Intensified rivalry in key categories (HIV, oncology, cell therapy) requires sustained high levels of investment in R&D and commercialization; failure to consistently deliver further practice-changing therapies or an inability to secure premium pricing may compress margins and net earnings in the long term.

Valuation

• The analysts have a consensus price target of $124.91 for Gilead Sciences based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $143.0, and the most bearish reporting a price target of just $98.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $32.3 billion, earnings will come to $10.0 billion, and it would be trading on a PE ratio of 18.7x, assuming you use a discount rate of 7.0%.
• Given the current share price of $115.76, the analyst price target of $124.91 is 7.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.