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The company has a portfolio of HIV prevention treatments such as Biktarvy and Descovy.
Shares of Gilead Sciences, Inc. dropped nearly 2.5% on Wednesday and extended losses after hours following a report that the Health and Human Services Department, led by Robert F. Kennedy Jr., plans to "drastically" cut federal funding for domestic HIV prevention.
While cuts have not been finalized, the Wall Street Journal reported, citing people familiar with the matter, that they could be announced soon as part of the Trump administration's broader budget reductions at the Centers for Disease Control and Prevention.
Gilead, which has a portfolio of HIV prevention treatments such as Biktarvy and Descovy, risks a hit to revenues if the report turns out to be true.
However, retail investors and Wall Street analysts remain largely unfazed for now.
Retail sentiment for Gilead on Stocktwits climbed further into the 'extremely bullish' zone on Wednesday, with message volume up 57% following the news.
Observers on the platform cited Gilead's dominance in HIV treatments, growing oncology presence, and strong free cash flow as reasons to hold on to the stock.
According to The Fly, JPMorgan acknowledged that the WSJ report is "clearly not a positive" but says the potential cuts wouldn't impact access to PrEP (pre-exposure prophylaxis). The firm noted that the CDC doesn't reimburse PrEP drugs but funds research and education.
The research firm remains bullish on Gilead's lenacapavir — a twice-yearly injectable HIV-1 capsid inhibitor — as a key growth driver and maintains an 'Overweight' rating on the stock.
Oppenheimer sees Gilead's pullback as a reaction to uncertainty but doesn't view the funding concerns as a material risk. The firm estimates PrEP revenues account for just 8% of Gilead's total sales, with Medicaid representing an even smaller fraction.
It expects early lenacapavir adoption mostly from private insurers and reiterated an 'Outperform' rating with a $132 price target.
If approved by the Food and Drug Administration, Morgan Stanley reportedly estimates that lenacapavir could generate annual sales of over $6 billion by 2030.
According to Koyfin data, Gilead stock currently trades at a 13.5x forward earnings multiple, compared to Eli Lilly's 36.1x and Amgen's 15.3x.
Shares of Gilead are up 16% this year, outperforming the NASDAQ Biotechnology Index's 3% gain.
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