Shares of beaten-down drugmaker Gilead Sciences Inc. (GILD) are oversold following news that has sparked concern over its HIV franchise, according to a handful of bulls on the Street.

Street Overreacting to UnitedHealth Announcement

In a note to clients on Thursday, Morgan Stanley analysts downplayed the risk of an announcement by UnitedHealth Group Inc. (UNH), which investors view as potentially eating into Gilead's revenue for its pricey drug treatments, as outlined by Barron's. Shares of Gilead plunged as much as 6% on Wednesday following news that UnitedHealth is launching a rewards program called My Scripts Reward, which promotes the use of low-cost therapies. HIV is the first class of drugs that it plans to tackle, as participating patients with certain prescriptions will pay no out-of-pocket fees. 

Morgan Stanley analyst Matthew Harrison, who rates shares of the Foster City, Calif.-based biotechnology company at equal weight, noted a handful of issues with UnitedHealth's announcement. First, it looks like an opt-in program, which given the "significant weight of the HIV patient advocacy lobby, forcing patients into such a program could carry political or reputational risks."

The drugs will also be available through a cost-sharing program, although UnitedHealth offered no specifics. He added that many doctors have switched patients to newer drugs with better safety profiles than those offered on the new program, suggesting that there may be "significant physician and patient resistance to such a regimen given these are chronic life-long therapies.” Lastly, the program will only impact patients with commercial health-care plans. Given that HIV has a "large government component," the Morgan Stanley analyst doubts that pricing will get much worse. 

"While many investors remember the HCV (hepatitis C virus) price wars, we believe such an outcome here is unlikely," wrote Harrison, whose $85 price target implies a 21% upside from Thursday afternoon as shares trade down roughly 0.2% at $70.19. 

RBC Capital Markets analyst Brian Abrahams was equally unconcerned by the UnitedHealth announcement, indicating that the Gilead sell-off was an "overreaction," as cited by MarketWatch. He remains bullish on the long-term future of the firm's HIV business. 

Raymond James, which rates Gilead stock at a strong buy, called the sell-off "perplexing," writing that “beyond 2021, this program or others like it should have no more impact than normal genericization, which is a known headwind for Gilead." Raymond James' Steven Seedhouse expects Gilead stock to gain 34% over 12 months. 

Gilead shares are down about 2% YTD through Thursday morning, underperforming the S&P 500's 1.8% decline amid a period of heightened market volatility.