Language in Debt Offering Suggests Gilead's (GILD) M&A Team is Ready to Pounce - Jefferies

September 16, 2016 11:16 AM EDT
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Price: $72.36 -0.08%

Rating Summary:
    24 Buy, 11 Hold, 0 Sell

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Language being used in the prospectus of Gilead Sciences' (NASDAQ: GILD) $5 billion debt offering last night suggests deals are more imminent, Jefferies analyst Brian Abrahams said in a note to clients Friday.

While smaller than last year's $10 billion and 2014's $8 billion offerings, instead of the typical "boiler plate" language used in those last two prospectuses the new one says proceeds may be used for "future acquisitions."

"To us, this signals that GILD is likely getting closer to a deal or series of deals, which we believe would help ease concerns about their perceived BD stagnation in recent years," Abrahams said.

The debt deal would give GILD approximately $29.5 billion in cash, the firm notes.

While it will be hard to move the need on GILD's ~$30B revenue base, they continue to believe that there could be assets
that help offset HCV declines, improve EPS, and increase potential DCF-based valuation.

"We continue to expect several small to medium-sized deals focused on oncology, liver disease, fibrosis, and rheumatology, though we would not rule out GILD moving into a new field such as orphan diseases," the analyst said.

Today's note didn't highlighted any specific takeover target, although they linked to prior reports which discussed specific potential deals. Companies mentioned as potential targets in those reports were:

  • Incyte (NASDAQ: INCY),
  • Vertex (NASDAQ: VRTX)
  • Intercept (NASDAQ: ICPT)
  • Alnylam Pharma (NASDAQ: ALNY)
  • Alexion (NASDAQ: ALXN)
  • Medivation (NASDAQ: MDNV) (since acquired by PFE)
  • Medicines (NASDAQ: MDCO)
  • BioMarin (NASDAQ: BMRN)
  • Kite (NASDAQ: KITE)
  • Celgene (NASDAQ: CELG)

One company not noted in the past reports, but seen as a clear potential target by the market is TESARO (NASDAQ: TSRO).

For an analyst ratings summary and ratings history on Gilead Sciences click here. For more ratings news on Gilead Sciences click here.

Shares of Gilead Sciences closed at $78.84 yesterday.



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