Post on 24-Jan-2017
transcript
GILEAD SCIENCES, INC.DEREK RAMAGE AND MICHAEL VANCANAGAN
BUSINESS OVERVIEW
• RESEARCH-BASED BIOPHARMACEUTICAL COMPANY• FOCUSED ON DISCOVERY,
DEVELOPMENT, AND COMMERCIALIZATION OF THERAPEUTICS • PRIMARILY CONCENTRATED
ON ANTIVIRAL DRUGS
* Headquarters: Foster City, CA
* Over 8,000 employees* Founded in 1987* Operates in USA and
internationally (more than 30 countries)
STOCK SUMMARY
* TICKER: GILD* STOCK EXCHANGE: NASDAQ* SECTOR: HEALTHCARE* INDUSTRY:
BIOPHARMACEUTICAL* 52 WEEK LOW: $71.39* 52 WEEK HIGH: $108.31* CURRENT PRICE: $74.87
* Target Price: $97.00* Current Price: $74.87* Recommendation: BUY
* Upside: 29.56%
INVESTMENT THESIS
• ROBUST PRODUCT PIPELINE• MARKET SHARE LEADER IN HIV AND HEPATITIS C
TREATMENTS• INCREASING R&D NEW INNOVATION
Steady & strong cash
flows Discipline with M&A
Innovation in areas of
unmet need
Catalysts
Competition in HCV space
RisksDisapproval in pipeline drugs
Healthcare reforms
INDUSTRY OUTLOOK AND GROWTH DRIVERS• TRUMP PRESIDENCY
• LESS PRICING PRESSURES
• BABY BOOMERS• AGING POPULATION
• ACCELERATED FDA APPROVAL FOR DRUGS WITH UNMET NEEDS • MANY UNCURED DISEASES
MANAGEMENT
CEO, PRESIDENT: JOHN F. MILLIGAN
CFO, EVP: Robin L. Washington
Overall Execution:
Patient on M&A
Raise HIV Disease Awareness
COO: Kevin Young EVP, R&D, CSO: Norbert Bischofberger
CURRENT PIPELINE DRUGS
PHASE 1 5 DRUGS
PHASE 2 15 DRUGS
PHASE 3 10 DRUGS
TOTAL: 30 DRUGS IN CLINICAL TESTING
• Sovaldi (NS3 inhibitor) is 4th generation of Hepatitis C products • 3 drugs in HIV, 1 in HCV • Focusing R&D on NASH franchises
FUTURE OF HCV, HIV, AND NASH
HCV-• 20 MILLION POTENTIAL NEW PATIENTS BY 2020 (WORLDWIDE)• MORE THAN 200,000 U.S. CASES PER YEAR
HIV- • PREVALENT IN ASIA AND SUB-SAHARAN AFRICA • 5 MILLION AND 25 MILLION PATIENTS, RESPECTIVELY • SLOW, BUT INCREASING, MARKET GROWTH- ABOUT $14 B
CURRENTLY NONALCOHOLIC FATTY LIVER DISEASE-
• NO CURE YET• 3 MILLION CASES PER YEAR IN THE U.S.• $35 BILLION MARKET SIZE BY 2025
GEOGRAPHIC BREAKDOWN OF REVENUEGeographic Revenue
United States Europe Other Countries
• United States 65%• Y/Y Growth: -8%
• Europe 23%• Y/Y Growth: 1%
• Other Countries 12%• Y/Y Growth: 7%
NOTABLE M&A (2006-2016)
• MYOGEN, INC.• $2.5 BILLION ACQUISITION, PULMONARY DISEASES
• CV THERAPEUTICS, INC.• $1.4 BILLION ACQUISITION, CARDIOVASCULAR DISEASES
• ARRESTO BIOSCIENCES, INC. • $225 MILLION ACQUISITION, FIBROTIC DISEASES AND CANCER
• PHARMASSET, INC.• $10.4 BILLION ACQUISITION, HCV
• PHENEX PHARMACEUTICALS. INC.• $470 MILLION AQUITISION, LIVER DISEASES
• NIMBUS APOLLO, INC. • $400 MILLION ACQUISITION, LIVER DISEASES
FINANCIAL ANALYSIS: SHARE INFORMATION• MARKET CAP: $99.39 B• BETA: 1.20 • DIVIDEND: $0.47• DIVIDEND YIELD: 2.49%• COMMON SHARES OUTSTANDING: 1.32 B• PUBLIC FLOAT: 1.31 B• P/E: 6.91, 5-YEAR AVERAGE P/E: 21.0, (INDUSTRY AVERAGE
OF 26.1) • PEG: 0.59
FINANCIAL ANALYSIS: REVENUE BREAKDOWN BY DRUG
Harvoni Sovaldi Epclusa Truvada Atripla Stribild Complera Viread 0
2000
4000
6000
8000
10000
12000
14000
16000
Notable Drugs
2013 2014 2015
• 45%= HCV, 47% = HIV
In Millions
RESEARCH & DEVELOPMENT
Year 2013 2014 2015
R&D Expenses 2,120 2,854 3,014
YoY Growth % 20% 35% 6%
• 2016 expected R&D = $4.0 Billion (43% increase)
• R&D focus to liver diseases, HIV and inflammation.
In millions
MARKET SHARES
79%
12%
9%
HIV
Gilead GlaxoSmithKline Other
75%
15%
7%
3%
HCV
Gilead Abbvie Merck Other
FINANCIAL ANALYSIS: FINANCIAL METRICS
Metric GILD ABBV MRK GSK AGN Industry
Gross Margin
86.6% 76.6% 63.9% 64.9% 75.8% 79.5%
Operating Margin
60.8% 36.7% 19.6% 6.6% -7.4% 32.0%
Net Margin
47.8% 24.8% 13.8% 1.1% -11.2 24.7%
P/E 6.91 16.1 31.5 274.0 12.9 26.1P/B 5.8 14.9 3.9 541.7 0.8 5.8P/S 3.3 3.9 4.3 2.8 4.5 5.1D/E 1.61% 5.77% 0.58% 140.3% 0.37% 14.0%Return on Research Capital
9.1 4.5 6.0 8.4 8.1------------
Dividend Yield
2.49% 3.80% 3.00% 5.5% 0.0% 2.77%
FCF $19.5B (61%)
$6.9 B(30%)
$9.3 B(23.5%)
$3.8 B(12.8%)
$2.6 B(17.3%)
(15%)
BALANCE SHEET
INCOME STATEMENT
STOCK PERFORMANCEYear To Date
Price Performance: -30%
STOCK PERFORMANCE: COMPETITORS
ANALYST OVERVIEW
• Strong Buy: 6
• Buy: 11
• Hold: 11
• Sell: 0
• Price Target Range: $74.29- $118.00
• Average Price Target: $95.74
DCF: HISTORICAL DATA AND BASE CASE
DCF: UPSIDE AND DOWNSIDE
WACC CALCULATION
DCF OUTPUT & TARGET PRICE
* Target Price: $97.00* Current Price:
$74.87* Recommendation:
BUY* Upside: 29.56%
WHY GILEAD?
• R&D EFFICIENCY TO ADVANCE ROBUST PIPELINE• STRONG CASH FLOW GENERATION• ENABLES FUTURE GROWTH IN
COMPANY
THANK YOU
•QUESTIONS?
SUPPLEMENTAL SLIDES
STOCK PERFORMANCE: 5 YEAR
RESEARCH & DEVELOPMENT
2013 2014 20150
5,000
10,000
15,000
20,000
25,000
30,000
35,000
R&D compared to Revenue
R&D Revenue
• 42% growth in R&D from 2013 to 2015
In millions