Allergan Going After Gilead? Gabelli Says CEO 'Playing Chess While The Market Is Playing Checkers'

Allergan plc Ordinary Shares AGN's acquisition of Tobira Therapeutics Inc TBRA has some analysts wondering: if Allergan is willing to pay a massive 500 percent premium for Tobira, then what could possibly come next?

Barrons cited Kevin Kedra, an analyst at Gabelli, who suggested in a report that Allergan's next target could be Gilead Sciences, Inc. GILD

Kedra said he was "surprised" at both the 500 percent premium implied in Allergan's acquisition and the strategic fit Tobira would offer. However, there is also the possibility that Allergan CEO Brent Saunders is "playing chess while the market is playing checkers."

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Kedra continued that Allergan has now made a "very loud statement" about its commitment to liver diseases and NASH (Nonalcoholic steatohepatitis), which Tobira focuses on. Gilead happens to be "the leading company" in liver diseases given its blockbuster hepatitis C franchises and a "deep pipeline" of NASH drugs including simtuzumab which in a Phase II trial.

Kedra also stated Saunders "likes big deals" but the list of targets for Allergan to acquire isn't particularly large. For instance, Biogen Inc BIIB would mark a "strategic fit" for Allergan has "talked down that speculation." Since Allergan has also avoided oncology and orphan drugs, an acquisition of Gilead could make senses.

Finally, Kedra suggested Gilead's stock is trading at just 7.4x 2017 earnings per share, which makes it "one of the cheapest companies" within the pharmaceutical and biotech space.