Gilead Sciences (GILD) has a current portfolio dominated by HIV treatment drugs. More than 70% of its sales come from HIV treatment products. However it also discovers, develops, and commercializes treatments for other infectious and pulmonary diseases. GILD is currently trading at around $37 and has a market capitalization of $28 billion. Its revenue is expected to grow by 10% next year and has healthy 15% earnings per share growth. The projected 5-year growth is in north of 16%.
The stock is currently trading at a price earnings ratio of 10.5 versus the industry average of 15 times. GILD is beating its competitors both in the gross and operating margins. Price/Sales ratio is 3.5, whereas the competitors are trading at a price/sales ratio of above 8. What makes the stock very interesting is its “price earnings to growth” ratio of just 0.6. We expect that the following catalysts will help the stock trade in north of $50:
The potential FDA approval of Quad Pill in 2012
Potential approval of Truvada as the first ever precautionary drug against HIV
Revenue diversification through acquisition of Pharmasset (VRUS).
GILD’s plan to de-lever to a Debt/EBITDA of 1.5x or lower
GILD’s attraction as an M&A target.
Stock price is not reflecting the potential growth opportunities.

What Is Quad Pill?
Quad Pill is a combination on Gilead’s four compounds into once a day pill. It’s a combination of two already FDA approved drugs, an experimental drug and an additional boosting agent. We believe that it will be able to get FDA approval in 2012 for the following reasons.To continue reading, click here.