Gilead Sciences Set to Test Support After NASH Drug Failed

A handful of bear notes is exacerbating headwinds for GILD

The shares of Gilead Sciences, Inc. (NASDAQ:GILD) are down 3.1% in electronic trading, after the biotech said a late-stage trial for its Non-Alcoholic Steatohepatitis (NASH) drug, selonsertib, failed to its main goal. Specifically, the treatment did not improve liver scarring when compared to a placebo in the nearly 900 patients enrolled in the study.

Analyst reaction has been swift, with Citigroup and Wells Fargo downgrading GILD stock to the equivalent of a "neutral." Both brokerage firms joined at least two others in cutting their price targets on Gilead, with Wells Fargo setting the lowest bar at $68 -- in line with last night's close at $67.62.

This round of bear notes echoes a recent trend, with GILD stock getting hit with several price-target cuts last week following the company's fourth-quarter earnings miss. Nevertheless, the majority of the 19 covering analysts maintained a "strong buy" rating at last night's close, with not a single "sell" on the books. Plus, the average 12-month price target of $81.75 is a nearly 21% premium to the stock's current perch.

Options traders have been bullish toward Gilead Sciences stock, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GILD's 10-day call/put volume ratio of 4.05 ranks in the 77th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

After hitting a five-year low of $60.32 on Dec. 26, GILD rallied all the way up to $70.50 by Feb. 1. However, the shares were rejected by their 100-day moving average, though short-term support has emerged near $65.50 -- home to the security's Jan. 3 bull gap levels.