Investing.com -- Gilead Sciences shares dropped more than 3% Wednesday following a Wall Street Journal report that the Health and Human Services Department is considering major cuts to federal funding for domestic HIV prevention programs.
Analysts, however, see only a limited impact on the company’s financial outlook.
According to BMO Capital, the potential removal of the Centers for Disease Control and Prevention’s (CDC) $1.3 billion in funding represents more of a “headline risk” rather than a serious threat to Gilead’s pre-exposure prophylaxis (PrEP) franchise.
While no final decision has been made, BMO analysts noted that “PrEP has been a key area of focus for investors in recent months with the potential launch of Gilead (NASDAQ:GILD)'s new long-acting PrEP medication lenacapavir slated for summer 2025.”
Oppenheimer analysts also downplayed the risk, stating that while federal prevention funding is in question, it would not affect reimbursement for preventative treatments like lenacapavir.
“Right now, PrEP revenues account for roughly 8% of Gilead’s total revenues, and a smaller portion of that is Medicaid patients, the primary beneficiaries of federal aid,” they wrote. Oppenheimer maintains an Outperform rating with a $132 price target, expecting most initial uptake of lenacapavir to be covered by private insurance.
Truist analysts dismissed the potential funding cut as “a nothingburger,” arguing that the CDC’s budget also covers other infectious diseases, not just HIV, and that HIV drug reimbursement and national coverage would remain intact.
Despite the market reaction, analysts appear largely unconcerned about the long-term impact on Gilead’s business.
