Gilead Sciences (ticker: GILD) shareholders have endured a steady downward drift since the stock peaked at its all-time high of $119.59 back in mid-2015. On Friday, Barclays analyst Geoff Meacham released a new research note in which he proposed five solutions for Gilead's slumping share price.
Meacham formatted his note as an open letter directly to company management, although he makes clear that he doesn't believe the company has been mismanaged up to this point. Instead, he says Gilead simply needs to think outside the box to fully unlock its value in the market.
"For better or worse, investors have typically viewed Gilead fundamentals with a 'boom or bust' mentality, and prevailing sentiment looks skewed toward the latter," Meacham says.
His solution involves the following five suggestions:
1. Consider merger and acquisition deals outside of the traditional scope of the company, including targets that specialize in other areas, targets that could appeal for financial considerations and targets that are not exclusively in Phase 3 drug developments.
2. If there is little improvement in the hepatitis C business this year, consider aggressive cost cutting or even restructuring the segment all together.
3. If at all possible, provide some clarity or even guidance for the company's Bictegravir-TAF Phase 3 combination program and help investors place a value on the company's HIV franchise.
4. If M&A deals don't make sense at current valuations, consider taking a "more aggressive in-licensing/business development approach."
5. Consider minimizing capital return programs and repatriating overseas cash to add financial flexibility needed to drive new growth initiatives.
"From our analysis and based on following the company for almost 12 years, we'd argue that addressing just a few of the five points above would be a great first step to re-rating," Meacham says.
Barclays believes that the company's share price could significantly benefit from the company leveraging its robust cash flow and pursuing potential high-impact deals.
Barclays maintains an "overweight" rating and $90 price target on Gilead stock.
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