Takeover of Incyte (INCY) Would Also Make Sense for Gilead Sciences (GILD) - Leerink

Leerink analyst Geoffrey Porges is out with new speculation regarding a takeover candidate for Gilead Sciences (NASDAQ: GILD). Porges said Incyte (NASDAQ: INCY) make sense for Gilead in terms of "both size of current and long term revenue prospects, as well as for the breadth of INCY’s portfolio, and the optionality of their pipeline and its potential synergies with Gilead’s existing products and development programs." In the past, Porges speculated that Vertex (NASDAQ: VRTX) would make a good acquisition candidate for Gilead.

Porges said Incyte would give Gilead a low single digit (3-4%) revenue CAGR through 2021, and a high single digit (8-9%) EPS CAGR for the same period.

"At a reasonable acquisition premium (30-40%), Gilead’s earnings would be diluted through 2018, but thereafter would be increased by the combination, assuming significant expense synergies from the target and from Gilead’s own research," the analyst said.

"Long term (post 2023) the earnings synergies could be as much as 20% or higher for Gilead compared to their standalone operations," he added.

"The near term upside for Gilead’s stock from this transaction might not be as compelling as a Vertex combination, since Incyte’s revenue growth really comes in the 2022-2025 period rather than sooner. Nevertheless we see a combined company capturing a significantly higher multiple from investors, and anticipate that a share price in the $107-113 range would not be unreasonable for the combined company post-merger and re-structuring."

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