I legitimately believe that Gilead Sciences (NASDAQ:GILD) is the best value in all of big biotech, and that a company like Pfizer or Merck will acquire it. In fact, GILD stock’s near 4% loss last week is not alarming in the least bit. That’s because seven years from now, Gilead will exceed its valuation in profits.
When value like this is present, it does not last long. Either big pharma will identify the value and acquire Gilead Sciences, or the market will realize the buyback and dividend appeal and GILD stock will appreciate. However, in that scenario, an acquisition would really help.
The fact that Gilead Sciences has not made any substantial acquisitions leads me to believe it will not. And if not, it is because Gilead is fielding offers of its own. That said, the supply of medium sized biotech companies to acquire is thin at best.
Those in the developmental stage with blockbuster drugs, like Juno Therapeutics (NASDAQ:JUNO), trade with multi-billion dollar valuations and are still years from an FDA approval. Those with cheaper valuations have a high degree of risk.
Gilled likely realizes that it has limited options for M&A, which is why it has remained so quiet. Still, remaining quiet is what continuously pressures GILD stock. At the end of the day, Gilead is either acquired, or it acquires. If the latter, there is only one company I see that could be its next Pharmasset, with a drug that has multi-billion dollar potential.
Gilead acquiring Acadia stock & Nuplazid makes sense
There is a massive gap between what Acadia Pharmaceuticals (NASDAQ:ACAD) believes Nuplazid is worth, and what the rest of Wall Street thinks. ACAD has thereby chosen the road less traveled. Acadia and ACAD stock will endure growing pains while launching Nuplazid versus selling itself short with a cheap buyout or partnership incentives.
With a $3.5 billion market capitalization, ACAD is nowhere near fair value. Nuplazid is an upgrade to competing drugs with fewer side effects. Many of the competing drugs create upwards of $5 billion annually in sales.
When you consider off label potential, label expansion, limited side effects, and a Breakthrough designation, it is possible, even likely that Nuplazid peaks with annual sales over $5 billion, or possibly $10 billion. I know that seems high, but the drug market suggests these lavish sales figures are correct.
Gilead is the best at identifying undervalued drugs and companies. Gilead then creates shareholder value with successful acquisitions and drug marketing programs.
Given the limited availability of value in biotech coupled with Acadia’s rare value, one has to believe that Gilead has Acadia stock on its radar. It would be the perfect tie-up to create shareholder value for both Acadia stock and GILD stock owners. Furthermore, if Gilead is not acquired, it is one of the few scenarios to create multiple appreciation that actually makes sense.
What’s the alternative? Should Gilead a pay $14 billion for a company and drug that has $2-$3 billion in peak sales potential, like Pfizer did? No, Gilead is smarter than that. Therefore, I am willing to bet that GILD has Nuplazid and ACAD stock on its radar.