Gilead Sciences (GILD - Get Report) found a valuable asset to buy: More of its own stock.

The Foster City, Calif.-based biotech giant announced a new $12 billion share repurchase plan on Tuesday night in conjunction with fourth-quarter earnings. Gilead still has $8 billion remaining under an existing stock buyback program, of which $5 billion will be utilized within the next three months.

Gilead's upsized share repurchase plan is a signal to investors that management believes its own stock -- down 16% over the past 12 months and 18% since the beginning of this year -- is undervalued. It also means investors expecting Gilead to pull the trigger on a mega-blockbuster acquisition are probably going to be disappointed, at least in the short term.

But Gilead executives said enough of the right things on Tuesday night's conference call to keep M&A hopes and dreams alive. Chief Financial Officer Robin Washington said the company could throttle back share repurchases if an acquisition opportunity presented itself. And John Milligan, Gilead's newly promoted CEO, mentioned oncology and inflammatory disease as areas outside its core antiviral franchises where the company could seek new partnerships or acquisitions -- for the right price.

For 2016, Gilead guided to total product sales in the range of $30 billion to $31 billion, in line with the sell-side consensus estimate but more conservative than the buy-side whisper number closer to $32 billion, which would have been flat with actual 2015 net product sales of $32.2 billion.

Historically, Gilead offers conservative product sales guidance in January, so it will shock no one if the company raises guidance later this year.

Still, Gilead's guidance explains why the company trades at a the lowest forward P/E multiple of all the large-cap biotech companies. Despite tremendous, dominant market share and sales for its stable of HIV and hepatitis C drugs, investors are struggling to identify the source of future revenue and earnings growth.

Sales of Harvoni and Sovaldi, Gilead's hepatitis C drugs, totaled a record $12.5 billion in the U.S. in 2015, but for 2016, the company said U.S. sales would be flat to slightly down due to increased competition and insurers' continued practice of restricting patient access.

Gilead will look outside the U.S. for more significant Harvoni and Sovaldi sales growth. Europe remains important and Japan was a big market for the company in the fourth quarter, but sales there next year could be negatively impacted by government-mandated price cuts.

Milligan, speaking on Tuesday night's call, said growth from Gilead's existing HIV and hepatitis C businesses was far from over. Milligan also singled out Gilead's nascent inflammatory disease pipeline, headlined by the partnership and equity stake in the Belgian drug maker Galapagos, done last December.

Big share buybacks are nice, but growth-starved biotech investors want Milligan, in his new Gilead CEO role, to look outside the company to find exciting and valuable stuff to buy.


Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.