Ariana Bhatia, Rebecca Deubler, Grace Farley, Sen Lin, Bryan McClellan, Kojo Osei, Aanchal Ramani

Overview

● Biopharmaceutical company founded 1987 focusing on HIV/AIDS, liver diseases (hepatitis), cancer, inflammatory and respiratory diseases, and cardiovascular conditions

● Bestsellers: Sovaldi (#2), Atripla (#22), Truvada (#23)

● Pipeline: 2 in trials, 8 phase three, 20 phase two, 9 phase one

Ticker GILD

Market Cap $157 billion

Current Price

$101.79

EPS 7.37

Debt / Equity

78.34

Investment ThesisDespite Gilead’s recent success, we believe their their stock is not done rising as the company’s high margin drugs Sovaldi + Harvoni are continuing to outperform, their robust pipeline signals strong growth, and they are well aligned for future strategic acquisitions.

Company ManagementJohn C. Martin, PhD - Chairman and CEO

● Previous: Bristol-Myers Squibb and Syntex Corporation● National Academy of Engineering● USC board of trustees● Been with Gilead for 20 years. CEO for 14 years.● Also director of the California Health Institute

● John F. Milligan, PhD - Chief Operating Officer● Norbert W. Bischofberger, PhD - Executive Vice President, Research and Development and

Chief Scientific Officer● Robin L. Washington - Executive Vice President and Chief Financial Officer

A very academic leadership that evokes confidence in Gilead’s research and products. The leadership also proves itself to be competent in business due to high revenue.

Catalysts 1. Presence in HepC market strong (83% market share) and prescription count

has steady growth, also market leader for HIV

2. Harvoni still at beginning of European market introduction; Japan recently approved Harvoni and Sovaldi for many varieties of HepC disease (1mil potential customers-Japan alone)

3. Expiration of several patents not until 2020, leaves ample time for new drugs to come to market

4. Sitting on cash ($12.26 billion), looking to buy back nearly 10% of stock and announced first dividend

5. Robust pipeline in HIV/AIDS, hematology & oncology, liver diseases, cardiovascular diseases, and respiratory diseases (next slide)

Pipeline

Recent Updates (Last week earnings call)

● Beat earnings projections by $0.60/share

● $700 mil beat revenue expectation

● 2015 sales expectations increased by $2 billion

● EPS outlook now $10.84, up $0.43 from previous expectation

● 2015 Q1 prescription count is double that of 2014 Q4 for Sovaldi franchise

Competitive Environment

● Major competitors: AbbVie, Merck, Bristol-Myers Squibb, Celgene

● US market share, hepatitis C: Gilead 83%, AbbVie 17%○ Harvoni requires 1 pill/day, Viekira Pak 6○ Price war led investors to abandon Gilead → price down

● Market leader in HIV/AIDS medication

Risks● Gilead could lose its competitive advantage in the HIV sphere

○ Market leader in HIV○ Their two drugs that are in final trials

● AbbVie and Merck want to create competitors of Sovaldi, the former has already created a drug that did not have great success

○ Sovaldi’s patent will not run out until 2029

● Price point of drugs is too high ○ Sovaldi treatment $84,000/person in U.S.○ Overpriced in U.S., price more than 95% lower in developing countries- keeps

demand high overall

● Growth prospects already priced in

1. Gilead parallels Apple in 2013a. Cash, announced first dividendb. Market strongholdc. Valued very low currently(see later quantitative analysis)

2. Market skeptical on possibility of another blockbuster drug in near future, however, they are not acknowledging the following:a. Expected free cash flow of $28 billion from now to 2017b. Possibility of strategic move: acquisition

i. Moody’s A+ credit & ability to take on debtii. History of successful acquisitions, eg: Pharmasset in 2011iii. Potential targets include, but not limited to: Achillion Pharmaceuticals (HepC),

Juno Therapeutics (oncology), Puma Biotechnology (oncology)

3. Strong pipeline (shown earlier)

Why is it not priced in?

Comps Model

DCF Analysis

Conclusion

We believe that GILD presents a good investment opportunity as it has strong pipeline growth, is sitting on a

large amount of cash, and is well positioned for a future acquisition.

Price Target: $130.46

Time Horizon: 12-18 months