RealMoney Silver - Insider Purchases & Buybacks: GILD

Insider Purchases & Buybacks: GILD
By Jason Raznick
RealMoney.com Contributor
3/13/2008 3:05 PM EDT

A buyback announcement is an indication that the company believes there is value in its shares. Add to this strong results and bright prospects, and we may have identified a stock that could yield good returns. Gilead Sciences (GILD) has announced an accelerated share repurchase program. (On Stockpickr, you can see the rest of the insider purchases and buybacks portfolio).

Gilead has entered into an agreement with Goldman Sachs to repurchase $500 million of its common stock under an accelerated share buyback program. The repurchase represents about 7.2 million shares and the company has about 930.8 million shares outstanding. The current agreement is part of Gilead's $3 billion share repurchase plan announced in October. The Foster City, Calif.-based company will have about $2.2 billion left for buybacks upon completion of this accelerated transaction.

The biotechnology firm's net income, excluding one-time items, jumped to $372.8 million, or 78 cents a share, in the fourth quarter, beating Wall Street expectations. Gilead was able to achieve robust sales growth, backed by its strong HIV drug franchise. HIV drugs Truvada and Atripla have been performing exceptionally well, and their sales jumped in the quarter. Wachovia analyst George Farmer upgraded his rating for Gilead to outperform from market perform, saying in his note that the company should generate solid profit and sales growth through 2010 because there is likely to be little competition for its key drugs. The combined sales of Truvada and Atripla comprised 67% of Gilead's total product sales last year.

A study sponsored by the National Institutes of Health found that patients with a high viral load were better off taking Truvada than GlaxoSmithKline's (GSK) Epzicom. Analyst Jason Kantor of RBC Capital Markets reiterated his outperform rating for Gilead, saying in his note to clients, "The results provide further proof of something that we already believed, which is that Truvada is the best backbone therapy for HIV." Citigroup analyst Dr. Yaron Werber reaffirmed a buy rating and a price target of $55 for Gilead. Werber said that the company could gain 5 cents a share in earnings for every 10% market-share gain in the U.S. and 15% market-share gain in Europe from patients switching to Truvada.

JPMorgan said in late February that this year's flu season could be the strongest in four years, which could lead to "modest upside" to its second-quarter and fiscal 2008 estimates for Gilead, which receives royalties from Roche on Tamiflu sales.

There are several investment funds that own shares of Gilead, and you can see the list at Stockpickr.com. It is interesting to note that Atalanta Sosnoff Capital has recently raised its stake in the company. Founded by Martin Sosnoff, this fund has about $5 billion in assets under management. The fund also holds Google (GOOG) , Microsoft (MSFT) and Apple (AAPL) .

Gilead has generated a solid return on equity of 61.24% for 2007. The accelerated share buyback indicates that the company sees value in its shares. Backed by a strong HIV drug franchise, I believe the stock will generate healthy returns over the next 12 to 18 months. I think this is a good time to take a closer look at Gilead.