Gilead's (GILD) GS-5745 Advances to Phase 3; More Deals Expected - RBC Capital

RBC Capital affirms Gilead Sciences (Nasdaq: GILD) at Outperform with a price target of $120 following news that GS-5745 is formally advancing into Phase III for gastric cancer in Q315.

Analyst Michael Yee commented, GILD has been optimistic about this novel antibody because of its potential in cancer and auto-immune diseases such as ulcerative colitis also advancing. We believe this is good for GILD investors because (1) expectations are low on this program (few if any investors ask on it), (2) pipeline is all upside for GILD at this point, (3) management is quietly building a pipeline and we predict they'll continue to do more cancer and immuno-oncology deals under $5 billion in size and they're looking in EU perhaps using OUS cash.

We would favor GILD also doing auto-immune deals since at this point the goal should be "get big drugs" and revenue growth....We do not believe GILD will make a large transformational deal because management has patience and wants to see the Phase I/II pipeline play out. A large accretive deal could be good for the stock since investors want more growth post 2017+ and P/E is low but there are only a few deals that could be possible and most seem unlikely and have been talked about by investors (VRTX, CELG, BMY, etc).

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