Bernstein: It's Time For Gilead To Pull The Trigger On This Acquisition

Bernstein analyst Geoffrey Porges said it's time for Gilead Sciences, Inc. GILD to continue the biotech M&A with a bid for Vertex Pharmaceuticals Incorporated VRTX. Porges noted that many investors "remain heavily exposed to mid and large cap biotech stocks" expecting further consolidation in the industry.

That should come from a Gilead acquisition of Vertex. Porges pegged the transaction at $45 billion, roughly a 50 percent premium to Vertex's $30.4 billion market capitalization at Monday's close ($125.55). At that price, a deal would be accretive after 2017 assuming a 27 percent cost savings. In 2015, the deal would be 7 or 8 percent dilutive to Gilead stock.

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The deal would also fill Gilead's need for $5 to $7 billion in "incremental revenue by 2020," according to Porges. Very few companies fit that bill, and Porges said that Vertex has "by far the best profile" and would complement Gilead's existing portfolio.

Porges estimated that a deal would move Gilead's stock to $130-140, up 30 to 40 percent from Monday's $100.65 closing price.

In pre-market activity, Vertex last traded at $128.95, up 2.7 percent. Gilead gained 0.7 percent to $101.39.

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