RBC Capital Positive that Gilead Sciences (GILD) Didn't Acquire Otezla

August 26, 2019 7:46 AM

RBC Capital analyst Brian Abrahams reiterated a Top Pick rating and $91.00 price target on Gilead Sciences (NASDAQ: GILD) after Amgen agreed to acquire Otezla from CELG/BMY for $13.4B, not Gilead.

Abrahams called it a good 'non-deal' for GILD.

"Recall we had viewed Otezla as a potentially good fit for GILD, as it could have accelerated their entrance into the rheum/inflamm space ahead of the filgotinib launch , but only if they could have obtained it for less than $9.6B," Abraham comments. "While at a higher price Otezla might still be accretive for another company with a pre- existing rheum infrastructure, for GILD, our sensitivity analysis (available upon request) would have indicated a negative impact on our DCF-based fair value at such prices (-$2 at $11.2B, -$4 at $13.4B). As such, while GILD does lose an opportunity to easily bolt on a rheum/inflamm commercial infrastructure, we believe bidding the asset up further would have been a mistake for the company. We remain bullish on GILD given our optimism about their LT HIV revenue/cash flow generation and pipeline optionality."

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Shares of Gilead Sciences closed at $62.51 yesterday.


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