Gilead Sciences (NASDAQ:GILD) has had a rough past five years, judging by its stock price, which peaked back in 2015. However, throughout this period, cash generation has been strong and was used to make a major acquisition, Kite in 2017 and, recently, to make an investment and licensing deal with Galapagos NV (GLPG). This article will focus on the Galapagos investment and how it could affect Gilead's future trajectory.
This article presumes the reader is familiar with Gilead basics. But, by way of reminders, in Q2, Gilead had revenue of $5.69 billion, up 1% y/y. GAAP EPS was $1.47 and non-GAAP EPS was $1.82. Cash flow from operations was $2.2 billion.
Background: Two Prior Deals
In addition to a number of smaller licensing or tuck-in deals, Gilead made two past acquisitions worth examining: Pharmasset in 2011 for $11.2 billion and Kite Pharma in 2017 for $11.9 billion. The Pharmasset deal led to Gilead having the first truly effective hepatitis C therapy on the market, resulting in a revenue and profit bump that drove Gilead stock to its all-time highs in 2015. The Kite deal gave Gilead a quick start in CAR-T cancer therapies, but the revenue ramp has been slow so far. In Q2 2019, the approved CAR-T cancer therapy Yescarta generated $120 million in revenue. To date, there has not been an obvious increase in Gilead's stock price due to Yescarta sales.
Galapagos Deal Details
The Gilead deal with Galapagos closed on August 23, 2019. It is mainly for collaboration in research and development but included an equity investment of $1.1 billion. Combined with prior ownership, Gilead now owns about 22% of Galapagos stock.
Gilead paid a $3.95 billion upfront fee, and it also is paying milestones and royalties for each potential therapy it chooses to option. Gilead will acquire rights to
