Gilead banks $10B, stirring fresh buzz about a blockbuster buyout

Gilead CEO John Martin

Four years ago, when Gilead bought Pharmasset for $11 billion in cash, there was a considerable amount of hooting on Twitter--and fretting among the analysts--about the huge gamble. That deal netted the company's franchise drug for hepatitis C, though, which immediately became a megablockbuster of historic proportions once it was approved and rolled out around the world.

In the second quarter, Gilead ($GILD) racked up close to $5 billion in hep C revenue from Sovaldi and Harvoni. And nobody hoots about the price execs paid anymore.

So it's no wonder then that when Gilead laid out the terms for raising $10 billion yesterday, on top of the blockbuster money it earns on HIV and hepatitis C, the move immediately stirred fresh buzz about what Gilead was going to buy next, and for how much.

Gilead's last quarterly call with analysts was highlighted by CEO John Martin's flirtatious remark that the company is "taking suggestions" about what it should buy. And with no hard hit list to contemplate, analysts have suggested the likes of Vertex ($VRTX), Incyte ($INCY), BioMarin ($BMRN), Medivation ($MDVN) and Alexion ($ALXN).

President John Milligan, though, essentially said that everything is on the table.

"As you suggested we could contemplate small deals, we could contemplate larger, perhaps even transformative deals," Milligan told analysts in July. "And we're in a position of strength so we could be fairly selective in terms of the things that we like to do and take our time to make sure that those things that we do choose to do we can execute on them fairly effectively, bring new products to market and continue to grow our top line revenue and EPS and so we'll take all those."

Gilead President John Milligan

Gilead doesn't reveal much to anyone about its internal planning process. Among big biotechs, it has the most closely guarded approach to dealmaking. So it was no surprise that the release mentioned that the money was intended for "general corporate purposes"--which is the way Gilead says "we'll tell you when we're ready." 

As The Wall Street Journal's Charley Grant noted, "investors can hope that Gilead might be finally getting around to making a large acquisition. Shareholders have clamored for a big deal as Gilead's hepatitis C franchise matures, while management has remained coy about its intentions."

In this M&A environment, though, the right deal will be greeted by a cheering section filled with Wall Street analysts.

- here's the release

Special Reports: Top 15 pharma companies by 2014 revenue - Gilead | Top 15 highest-paid biopharma CEOs of 2013 - John Martin, Gilead

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