Gilead stock drops due to potential U.S. funding cuts
Gilead Sciences' stock price fell sharply on Wednesday after reports that the Department of Health and Human Services (HHS) is considering cuts to federal funding for HIV prevention. This funding is essential for Gilead, as it significantly contributes to the company's overall sales. The Wall Street Journal reported that the HHS might announce its plans soon, possibly within a day. However, there is uncertainty, as the Trump administration could modify or withdraw these plans. These discussions coincide with anticipated job cuts at the Centers for Disease Control and Prevention (CDC). Last year, Gilead earned over $19.61 billion from its HIV treatments, with sales increasing by 8%. This revenue accounted for 68% of the company’s total income. Notably, sales from pre-exposure prophylaxis, or PrEP, were a part of this, with Truvada and Descovy bringing in $2.23 billion in 2024. Following the news, Gilead's stock dropped by 2.5%, closing at $107.51. The stock had previously shown strong performance, but this fall places it just above the buy zone it had entered earlier this year. The CDC allocates a significant budget to HIV prevention, including $1.3 billion in 2023 for various infectious diseases. They also support a PrEP initiative, which provides free HIV prevention drugs. However, J.P. Morgan analyst Chris Schott commented that funding cuts would not severely impact Gilead, as most of its PrEP sales come from the commercial market, not federal programs. Gilead is also preparing to launch a new drug, lenacapavir, for HIV prevention this summer, pending FDA approval. If approved, it will be the first medication that allows for injections twice a year. Schott maintains a positive outlook on Gilead stock despite the recent news, viewing lenacapavir as a potential significant growth driver in the future.