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Gilead: 25 Billion Reasons For Investors To Stay The Course - A Major Acquisition Is Coming

Despite superb 3rd quarter performance initial response to Gilead's earnings focused on a moderating pace of US sales of the company's Sofosbuvir based HCV regimen.

The company continues to perform exceptionally well both in its HIV and HCV franchises as well as in advancing the future of both of these areas of core viral competencies.

The company's strong operating cash flow and strong balance sheet make it highly likely that Gilead will make a significant to transformational acquisition in the next year.

A Quick Commentary on the 3rd Quarter

Another fiscal quarter has passed into history and Gilead Sciences (NASDAQ:GILD) has chalked up yet one more impressive beat on sales and income. For investors in the company it has become old hat now as Gilead continues to silence its most ardent critics and overcome each new challenge the markets foresee as its undoing. This year it was Viekira Pak, volume based discounts on its HCV regimen, and the flattening of HCV regimen sales as the market "matured." (See the author's analysis of the HCV market here). Through it all the company continually beat analysts' EPS projections while raising sales estimates in each of the past two quarters.

In this most recent quarter the company reported and adjusted EPS of $3.22 on revenue of $8.3 billion, a year over year rise of 83% on strong sales of Harvoni, a less than expected drop in Sovaldi sales, and relatively strong or less than expected declines in sales across its other product lines. It was an incredibly impressive quarter.

The market, however, chose to focus on signs that the U.S. HCV market is maturing and shares sold off. While...