GILD Gilead Sciences
Durable HIV cash machine with pipeline momentum; fairly valued at best.
The story
Gilead's HIV franchise remains a durable cash machine with a strong pipeline of new approvals (Biktarvy successor, lenacapavir), but the TTM financials are distorted by what appears to be a large one-time charge producing a -3.1% operating margin and $3.2B net loss. Underlying franchise economics remain intact at ~35-37% operating margins; the core story is steady mid-single-digit growth from HIV plus optionality in oncology, not a dramatic turnaround.
Y1 growth nudged from 5% to 6% reflecting three recent FDA approvals and Biktarvy/lenacapavir momentum providing near-term upside. Terminal growth raised from 2% to 3.5% — still below the 4.78% risk-free rate — as the HIV pipeline depth and oncology optionality justify modestly better long-run expectations. Target margin held at 36% (down slightly from 37%): the TTM negative margin is clearly transitory, but I'm being slightly more conservative given pipeline investment costs. Sales-to-capital unchanged at 0.62, consistent with the 0.64 TTM observed. All other drivers unchanged as the fundamental story hasn't materially shifted.
Value drivers
| Revenue growth (Y1) | 6.0% |
| Terminal growth | 3.5% |
| Forecast horizon | 8y |
| Target operating margin | 36.0% |
| Years to target margin | 5 |
| Sales-to-capital | 0.62 |
| Beta | 0.90 |
| Failure probability | 3.0% |
| Cost of capital (WACC) | 8.4% |
| Terminal WACC | 8.8% |
Valuation bridge
| PV of explicit FCFF | 31.14B |
| PV of terminal value | 84.59B |
| Equity value | 95.49B |
| ÷ shares → per share | $77.01 |
News
bullish +0.60 · 8 articles
- Bixlenvo Gives Gilead a New HIV Growth Path. How Large is the Market?
- IBB Just Beat the S&P 500 by 22 Points in Three Months. Are You Late to the Party?
- Gilead Sciences Just Won Its Third FDA Approval in Less Than 4 Months. Is the Stock Still Underrating This Turnaround Play?
- Will New HIV and Oncology Approvals Redefine Gilead Sciences' (GILD) Treatment Platform Narrative?
- Kymera Therapeutics (KYMR) Up 10.2% Since Last Earnings Report: Can It Continue?
- Gilead Keeps Writing Bigger Checks—But Can the Drugs Keep Paying for Them?
- Gilead’s growing HIV franchise; cell therapy licensing deals plummet
- Why Is Gilead (GILD) Up 13.6% Since Last Earnings Report?
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 32.28B | 6.0% | 4.7% | 1.31B | 2.95B | -1.63B | -1.51B |
| 2 | 34.11B | 5.6% | 12.5% | 3.71B | 2.94B | 769.59M | 654.49M |
| 3 | 35.91B | 5.3% | 20.3% | 6.35B | 2.91B | 3.44B | 2.70B |
| 4 | 37.68B | 4.9% | 28.2% | 9.22B | 2.85B | 6.37B | 4.60B |
| 5 | 39.40B | 4.6% | 36.0% | 12.32B | 2.78B | 9.54B | 6.37B |
| 6 | 41.06B | 4.2% | 36.0% | 12.84B | 2.68B | 10.16B | 6.25B |
| 7 | 42.64B | 3.9% | 36.0% | 13.34B | 2.55B | 10.78B | 6.12B |
| 8 | 44.14B | 3.5% | 36.0% | 13.80B | 2.41B | 11.40B | 5.96B |
Key risks
- HIV franchise erosion from generic competition or loss of market share to competitors
- Pipeline failures in oncology or long-acting HIV reducing growth optionality
- Large debt load ($25B) constraining financial flexibility if revenue growth disappoints
Catalysts
- Lenacapavir long-acting HIV prevention approval expanding total addressable market
- Oncology portfolio (Trodelvy, etc.) achieving blockbuster status and diversifying revenue