Gilead Sciences rises as Wall Street links $10B debt offering to possible acquisition

MarketsAssociated Press

Shares of Gilead Sciences rose Thursday after the hepatitis C drugmaker said it will issue $10 billion in debt, leading to speculation that it may be getting ready to make a big acquisition.

Gilead announced the debt offering after the markets closed Wednesday. The company said it plans to use the proceeds for general corporate purposes. The Foster City, California, company did not say it was looking to make a deal and declined to comment on that possibility Thursday. But it has signaled it is open to them.

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In July Chief Operating Officer John Milligan said Gilead is "in a position of strength" in considering large or small deals.

The company's shares advanced $4.28, or 4.1 percent, to $108.09 in afternoon trading.

Jefferies analyst Brian Abrahams said it's not clear if this debt offering is connected to any acquisition, but he said Gilead might need to make deals in order to shore up future profits. He added that Gilead has a "strong track record in major acquisitions."

Gilead's revenue more than doubled to almost $25 billion in 2014 on the strength of its hepatitis C treatments Sovaldi and Harvoni. Both drugs are connected to Gilead's $11.1 billion acquisition of drug developer Pharmasset in early 2012. Sovaldi was approved in December 2013 and surpassed $10 billion in sales last year. Harvoni, which combines Sovaldi with a newer drug, was approved in October and has now become the company's biggest seller. Gilead also makes treatments for HIV and other viral diseases.

If Gilead wants to make a major deal, Abrahams said, its targets could include Vertex Pharmaceuticals Inc., Medivation Inc., Incyte Corp., BioMarin Pharmaceutical Inc., Alnylam Pharmaceuticals Inc. or Baxalta Inc. He said the company would need to take on more debt to complete those deals.

In August Irish drugmaker Shire PLC went public with a $30 billion offer for Baxalta, which makes treatments for bleeding disorders. Baxalta said the offer is too low and said it did not want to be acquired so soon after its spinoff from Baxter International Inc.

A wave of acquisitions has swept through the pharmaceutical industry recently, with at least six deals worth $8 billion agreed to or completed in 2015. Those deals included Pfizer's $15 billion purchase of injectable drug and infusion system maker Hospira, which closed this month, and Teva Pharmaceutical Industries' $40.5 billion purchase of Allergan's generic drug business, which was announced in July and is expected to close early next year.

Gilead's deals since the closing of the Pharmasset acquisition include its $510 million purchase of YM BioSciences in 2013 and its purchase of a liver disease treatment from Phenex Pharmaceuticals in January. That deal could cost up to $470 million.

Gilead disclosed $11.92 billion in debt at the end of the second quarter. Analyst Abrahams said the company's leverage is low compared to its profits.