GILD Pitch

GILEAD SCIENCES, INC.DEREK RAMAGE AND MICHAEL VANCANAGAN

BUSINESS OVERVIEW

• RESEARCH-BASED BIOPHARMACEUTICAL COMPANY• FOCUSED ON DISCOVERY,

DEVELOPMENT, AND COMMERCIALIZATION OF THERAPEUTICS • PRIMARILY CONCENTRATED

ON ANTIVIRAL DRUGS

* Headquarters: Foster City, CA

* Over 8,000 employees* Founded in 1987* Operates in USA and

internationally (more than 30 countries)

STOCK SUMMARY

* TICKER: GILD* STOCK EXCHANGE: NASDAQ* SECTOR: HEALTHCARE* INDUSTRY:

BIOPHARMACEUTICAL* 52 WEEK LOW:  $71.39* 52 WEEK HIGH: $108.31* CURRENT PRICE: $74.87

* Target Price:  $97.00* Current Price: $74.87* Recommendation: BUY

* Upside: 29.56%

INVESTMENT THESIS

• ROBUST PRODUCT PIPELINE• MARKET SHARE LEADER IN HIV AND HEPATITIS C

TREATMENTS• INCREASING R&D NEW INNOVATION

Steady & strong cash

flows Discipline with M&A

Innovation in areas of

unmet need

Catalysts

Competition in HCV space

RisksDisapproval in pipeline drugs

Healthcare reforms

INDUSTRY OUTLOOK AND GROWTH DRIVERS• TRUMP PRESIDENCY

• LESS PRICING PRESSURES 

• BABY BOOMERS• AGING POPULATION

• ACCELERATED FDA APPROVAL FOR DRUGS WITH UNMET NEEDS • MANY UNCURED DISEASES

MANAGEMENT

CEO, PRESIDENT: JOHN F. MILLIGAN

CFO, EVP: Robin L. Washington

Overall Execution:

Patient on M&A

Raise HIV Disease Awareness

COO: Kevin Young EVP, R&D, CSO: Norbert Bischofberger

CURRENT PIPELINE DRUGS

PHASE 1 5 DRUGS

PHASE 2 15 DRUGS

PHASE 3 10 DRUGS

TOTAL: 30 DRUGS IN CLINICAL TESTING

• Sovaldi (NS3 inhibitor) is 4th generation of Hepatitis C products • 3 drugs in HIV, 1 in HCV • Focusing R&D on NASH franchises

FUTURE OF HCV, HIV, AND NASH

HCV-• 20 MILLION POTENTIAL NEW PATIENTS BY 2020 (WORLDWIDE)• MORE THAN 200,000 U.S. CASES PER YEAR

HIV- • PREVALENT IN ASIA AND SUB-SAHARAN AFRICA • 5 MILLION AND 25 MILLION PATIENTS, RESPECTIVELY • SLOW, BUT INCREASING, MARKET GROWTH- ABOUT $14 B

CURRENTLY NONALCOHOLIC FATTY LIVER DISEASE-

• NO CURE YET• 3 MILLION CASES PER YEAR IN THE U.S.• $35 BILLION MARKET SIZE BY 2025

GEOGRAPHIC BREAKDOWN OF REVENUEGeographic Revenue

United States Europe Other Countries

• United States 65%• Y/Y Growth: -8%

• Europe 23%• Y/Y Growth: 1%

• Other Countries 12%• Y/Y Growth: 7%

NOTABLE M&A (2006-2016)

• MYOGEN, INC.• $2.5 BILLION ACQUISITION, PULMONARY DISEASES

• CV THERAPEUTICS, INC.• $1.4 BILLION ACQUISITION, CARDIOVASCULAR DISEASES

• ARRESTO BIOSCIENCES, INC. • $225 MILLION ACQUISITION, FIBROTIC DISEASES AND CANCER

• PHARMASSET, INC.• $10.4 BILLION ACQUISITION, HCV

• PHENEX PHARMACEUTICALS. INC.• $470 MILLION AQUITISION, LIVER DISEASES

• NIMBUS APOLLO, INC. • $400 MILLION ACQUISITION, LIVER DISEASES

FINANCIAL ANALYSIS: SHARE INFORMATION• MARKET CAP: $99.39 B• BETA: 1.20 • DIVIDEND: $0.47• DIVIDEND YIELD: 2.49%• COMMON SHARES OUTSTANDING: 1.32 B• PUBLIC FLOAT: 1.31 B• P/E: 6.91, 5-YEAR AVERAGE P/E: 21.0, (INDUSTRY AVERAGE

OF 26.1) • PEG: 0.59

FINANCIAL ANALYSIS: REVENUE BREAKDOWN BY DRUG

Harvoni Sovaldi Epclusa Truvada Atripla Stribild Complera Viread 0

2000

4000

6000

8000

10000

12000

14000

16000

Notable Drugs

2013 2014 2015

• 45%= HCV, 47% = HIV

In Millions

RESEARCH & DEVELOPMENT

Year 2013 2014 2015

R&D Expenses 2,120 2,854 3,014

YoY Growth % 20% 35% 6%

• 2016 expected R&D = $4.0 Billion (43% increase)

• R&D focus to liver diseases, HIV and inflammation.

In millions

MARKET SHARES

79%

12%

9%

HIV

Gilead GlaxoSmithKline Other

75%

15%

7%

3%

HCV

Gilead Abbvie Merck Other

FINANCIAL ANALYSIS: FINANCIAL METRICS

Metric GILD ABBV MRK GSK AGN Industry

Gross Margin

86.6% 76.6% 63.9% 64.9% 75.8% 79.5%

Operating Margin

60.8% 36.7% 19.6% 6.6% -7.4% 32.0%

Net Margin

47.8% 24.8% 13.8% 1.1% -11.2 24.7%

P/E 6.91 16.1 31.5 274.0 12.9 26.1P/B 5.8 14.9 3.9 541.7 0.8 5.8P/S 3.3 3.9 4.3 2.8 4.5 5.1D/E 1.61% 5.77% 0.58% 140.3% 0.37% 14.0%Return on Research Capital

9.1 4.5 6.0 8.4 8.1------------

Dividend Yield

2.49% 3.80% 3.00% 5.5% 0.0% 2.77%

FCF $19.5B (61%)

$6.9 B(30%)

$9.3 B(23.5%)

$3.8 B(12.8%)

$2.6 B(17.3%)

(15%)

BALANCE SHEET

INCOME STATEMENT

STOCK PERFORMANCEYear To Date

Price Performance: -30%

STOCK PERFORMANCE: COMPETITORS

ANALYST OVERVIEW

• Strong Buy: 6

• Buy: 11

• Hold: 11

• Sell: 0

• Price Target Range: $74.29- $118.00

• Average Price Target: $95.74  

DCF: HISTORICAL DATA AND BASE CASE

DCF: UPSIDE AND DOWNSIDE

WACC CALCULATION

DCF OUTPUT & TARGET PRICE

* Target Price:  $97.00* Current Price:

$74.87* Recommendation:

BUY* Upside: 29.56%

WHY GILEAD?

• R&D EFFICIENCY TO ADVANCE ROBUST PIPELINE• STRONG CASH FLOW GENERATION• ENABLES FUTURE GROWTH IN

COMPANY

THANK YOU

•QUESTIONS?

SUPPLEMENTAL SLIDES

STOCK PERFORMANCE: 5 YEAR

RESEARCH & DEVELOPMENT

2013 2014 20150

5,000

10,000

15,000

20,000

25,000

30,000

35,000

R&D compared to Revenue

R&D Revenue

• 42% growth in R&D from 2013 to 2015

In millions