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Strategies & Market Trends : Value Investing

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To: Graham Osborn who wrote (58081)	9/29/2016 9:04:44 AM
From: Micah Lance	Read Replies (1) of 78760

I don't think you can reliably value a biotech based on tangible book especially when intangibles include things like patents. The company has net cash over $3billion and after a recent bond sale now have $30B in cash. GILD certainly has its issues. Its revenues are declining and will continue to do so as their HepC sales are going to slow. They have numerous ways to fix this slowing revenues whether it be through increased research, acquiring other drugs to bolster their pipeline, or better explain their current pipeline which has significant growth opportunities through HepB and NASH. I was concerned about them making a stupid acquisition and paying a large premium, however my concerns are going away as they appear to be extremely selective about who they acquire and for what price (this could easily change). They have some of the best management in biotech including their chief science officer who really is one of the best guys in biotech. Basically, I'm seeing a company with tons of cash that's generating a ton of cash (and will continue to do so even with declining revenues) that can easily make its way out of their current issues. They currently trade at ~5.8 EV/EBITDA and ~6.2 EV/FCF.

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