Market Overview

Bernstein: It's Time For Gilead To Pull The Trigger On This Acquisition

Bernstein: It's Time For Gilead To Pull The Trigger On This Acquisition
Related GILD
Najarian Brothers See Unusual Options Activity In Procter & Gamble And Gilead
With $36.7B In Cash, Bank of America Expects Gilead To Shop For Complements To Drug Pipeline
Celgene's Otezla-Colitis Story; Implications For Other Biotechs (Seeking Alpha)

Bernstein analyst Geoffrey Porges said it's time for Gilead Sciences, Inc. (NASDAQ: GILD) to continue the biotech M&A with a bid for Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX). Porges noted that many investors "remain heavily exposed to mid and large cap biotech stocks" expecting further consolidation in the industry.

That should come from a Gilead acquisition of Vertex. Porges pegged the transaction at $45 billion, roughly a 50 percent premium to Vertex's $30.4 billion market capitalization at Monday's close ($125.55). At that price, a deal would be accretive after 2017 assuming a 27 percent cost savings. In 2015, the deal would be 7 or 8 percent dilutive to Gilead stock.

Related Link: Oppenheimer Is Excited About These 3 Biotech Stocks

The deal would also fill Gilead's need for $5 to $7 billion in "incremental revenue by 2020," according to Porges. Very few companies fit that bill, and Porges said that Vertex has "by far the best profile" and would complement Gilead's existing portfolio.

Porges estimated that a deal would move Gilead's stock to $130-140, up 30 to 40 percent from Monday's $100.65 closing price.

In pre-market activity, Vertex last traded at $128.95, up 2.7 percent. Gilead gained 0.7 percent to $101.39.

Image credit: Jeffrey Beall, Wikimedia

Latest Ratings for GILD

Feb 2018BMO CapitalMaintainsOutperformMarket Perform
Feb 2018Leerink SwannMaintainsMarket PerformMarket Perform
Feb 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for GILD
View the Latest Analyst Ratings

Posted-In: Bernstein Gilead Sciences Vertex Pharmaceuticals Inc.Analyst Color Biotech Analyst Ratings General Best of Benzinga


Related Articles (GILD + VRTX)

View Comments and Join the Discussion!