Gilead Sees Large Insider Stock Sale Into Debt Offering

The first issue is a multi-traunch bond offering. We do not yet have formal pricing nor the formal size, but Gilead is set to offer up notes and bonds that mature in five years, 10 years and 30 years. These effectively will be used to refinance existing debt, as well as for share repurchases.

It should be pointed out that Gilead has more than $8 billion in liquidity, if you consider its cash and blend in the short-term and long-term investments — versus over $7.9 billion in long-term debt and total liabilities of just over $15 billion.

Another key observation from this week was that Moody’s raised Gilead’s senior unsecured credit ratings to A3 from Baa1 to show the strength of the company’s balance sheet and its expectations of expanded revenue, EBITDA and cash flows from the biotech giant’s hepatitis C drug franchise. Apparently the ratings agency figured out that selling drugs in the United States for over $80,000 and $90,000 for a regimen (while potentially selling a generic version at a fraction of the cost to nations such as India) is going to add handily to its books.

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So, what about that large stock sale from a key Gilead insider? John Milligan, Gilead’s president and chief operating officer, exercised stock options that generated a sale of some 146,895 shares. Before getting too skeptical or wondering if Milligan was hitting a “panic sell button,” keep in mind that this was a planned share sale under a 10b5-1 plan. Still, when officers take home well over $10 million in stock sales, it does tend to get noticed by the investment community.

The options strike price listed as the cost basis was down at a mere $8.01, and the sale price was listed all the way up at $107.37. The date listed for the sales was November 11, and the net profit was more than $14.5 million! These were broken down in the filing as follows in volume-weighted average price transactions:

• 66,362 shares at $106.8543
• 73,187 shares at $107.7055
• 7,346 shares at $108.7705

Please do not think for a second that Milligan sold out and is headed for the park to feed pigeons or to sail the world. Milligan is still listed as the direct owner of another 974,048 shares of Gilead. If he could sell those all at once at current share prices, it would have a value of just over $104 million.

Gilead shares were down roughly 0.8% at $107.10 in mid-afternoon trading on Wednesday. Its 52-week range is $63.50 to $116.83, and its consensus analyst price target is above $122 as of Wednesday.

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