Gilead Sciences, Inc. GILD was up 3.3% after the company announced the successful pricing of its senior note offering worth $10 billion in aggregate principal amount. The company is offering six tranches of senior notes maturing between 2018 and 2046 with interest rate ascending from 1.85% to 4.75%. The offering will close on Sep 14, 2015, subject to the satisfaction of customary closing conditions.
The company intends to use the net proceeds from the senior notes offering for general corporate purposes including the repayment of debt, working capital, payment of dividends and the repurchase of its outstanding common stock pursuant to its authorized share repurchase program. The timing for Gilead to lock in current rates with its senior notes offering is favorable, considering that the U.S. Federal Reserve might hike rates in the near term.
Gilead’s revenues received a major boost with the launch of hepatitis C virus (HCV) drugs Sovaldi (Dec 2013) and Harvoni (Oct 2014). Although Sovaldi and Harvoni sales have been impressive, Sovaldi sales are already weakening owing to availability of newer HCV therapies. Other approved HCV therapies include Johnson & Johnson’s JNJ Olysio and AbbVie’s ABBV Viekira Pak. Pricing measures in the form of rebates and discounts could lead to a slowdown in Harvoni sales. With uncertainty surrounding the future of its blockbuster HCV drugs, Gilead must be looking to augment its portfolio.
Gilead has a history of boosting its portfolio and pipeline by entering into licensing and acquisition agreements. In fact, the blockbuster HCV therapy, Sovaldi, was added to Gilead’s portfolio through the Pharmasset acquisition in 2012. In May 2015, Gilead acquired privately held Danish company, EpiTherapeutics ApS, for $65 million gaining access to the latter’s library of first-in-class, selective small molecule inhibitors of epigenetic regulation of gene transcription, in particular histone demethylases. Earlier this year, the company acquired a privately held biotechnology company, Phenex, to develop treatments for liver diseases including nonalcoholic steatohepatitis (NASH). Thus, we can see more such acquisitions from Gilead in the near term.
Gilead carries a Zacks Rank #1 (Strong Buy). Regeneron Pharmaceuticals, Inc. REGN is another favorably ranked stock in the health care sector carrying the same Zacks Rank as Gilead.
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