2017-Sep-27 Gilead Sciences Update

2017-Sep-27 Gilead Sciences Update

Subject: Portfolio stock update (Gilead Sciences)

Dear Investor,

I hope you have been able to enjoy this spectacular weather! Gilead Sciences, the maker of the first drug to cure Hepatitis-C, is in your portfolio and also in the news. Gilead is an extremely profitable company, generating most of its revenue from Hepatitis-C and HIV drugs. The main issue has been that its Hepatitis-C drugs are cures, not merely managing the disease, and Gilead has literally been curing its consumer base.

This is quite rare as most biotechnology companies manage diseases by administering drugs that act to treat the symptoms. So although fantastic from a humanitarian point of view, it has not been great for the company’s stock. As a result, the stock has languished for the past 18 months, while investors and analysts have been waiting for the company to deploy its massive cash hoard. Well on August 28th, Gilead did just that and agreed to buy Kite Pharma (KITE) for $11.9 Billion – immediately giving Gilead a very exciting drug pipeline in the oncology space.

KITE is focused on the development and commercialization of cancer immunotherapy products to target and kill cancer cells. This is very exciting and timely as the US has just approved the first treatment to redesign a patient’s own immune system so it attacks cancer (this approval occurred a few days after this acquisition was announced). Below is an article by the BBC describing it as, “First cancer ‘living drug’ gets go-ahead”.

http://www.bbc.com/news/health-41094990

Back to Gilead – the stock has climbed 15% since the announcement and remains a very inexpensive stock, paying a ~3% dividend. Additionally, it is still sitting on close to $30 billion in cash so will likely make another acquisition in the next year. So stay tuned to a very interesting space.

Best regards,

Haakon