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Gilead Sciences: What Would Be The Benefits Of A Medivation Acquisition?


Acquisition activity may serve as a possible catalyst for Gilead Sciences.

Investors are optimistic a move similar to the Pharmasset acquisition will manifest itself.

The article below will discuss the impact of an acquisition for Medivation on Gilead Sciences fair value.

Gilead Sciences (NASDAQ:GILD) remains one of the most exciting companies in the market today. The bull/bear camp is full of knowledgeable participants with very valuable opinions that further add to the overall audience knowledge on the subject. I would like to thank all who have graciously taken the time to read and comment on my two recent articles on GILD which can be seen here and here. The article below will discuss the impact on GILD fair value if they acquire Medivation (NASDAQ:MDVN) a biotech outfit with a growing oncology product named Xtandi for the treatment of prostate cancer. With CNBC reporting that GILD is one of the four finalists in the running for MDVN, it is worth discussing in depth the impact on GILD DCF if a transaction is consummated.

Original Fair Value Model

A special thank you to Matt Hogan and the team at for access to the excellent tools shown below.

My standalone Fair Value model nets out a price target for GILD of $104.85 per share. I have incorporated the bottom end of management's revenue guidance for 2016 while using the top end of expense and a tax rate of 20%. Due to the terminal decline in the HCV franchise, the DCF indicates GILD will bleed out revenue well into 2020. I do expect the HIV franchise to show considerable growth over the next few years as a combination of annual price hikes coupled with market share gains will allow the HIV franchise to outpace the importance of the declining HCV franchise by 2019. The conversation needs to shift from continued growth in HCV to the next sources of revenue as the market is locked in a terminal decline. I am not saying it is not an important market; it has just...