Yale College Student Investment Group

1. Yale College Student Investment Group Gilead Sciences Inc. (GILD) Presented by: SudharshanMohanram, Frank Han

2. Investment Thesis • Why is stock ‘undervalued’? • Overreaction: Gilead Sciences reported disappointing results on its hepatitis C drug GS-7977's study, and its market capitalization fell by as much as $6 billion since the announcement.  • Why will the price rebound? • GS-7977 will likely become the leading therapy in treating Hepatitis C and new trials will be created to allow use in Genotype 1 patients. New data on Genotype 1 patients will be released in the coming weeks. • Firm’s HIV business is the global leader in a rapidly growing and highly profitable market, driving growth of company for the foreseeable future. • Gradual returns from 11 billion dollar acquisition of Pharmasset • Potential FDA approval of revolutionary drugs that will create new, robust revenue streams • Company has limited risks, with a diversified portfolio of drugs as well as no major patents expiring until 2018

3. Product Line • HIV/AIDS • Atripla: Atripla is the first once-daily single-tablet regimen for HIV intended as a stand alone therapy or in combination with other antiretrovirals. • Truvada: An oral formulation dosed once a day as part of combination therapy to treat HIV infection in adults. It is a fixed-dose combination of our antiretroviral medications, Viread and Emtriva. • Viread: An oral formulation of a nucleotide analog reverse transcriptase inhibitor, dosed once a day as part of combination therapy to treat HIV infection in patients 2 years of age and older.  • Complera/Eviplera: The second complete single-tablet regimen for the treatment of HIV and is a fixed-dose combination of our antiretroviral medications, Viread and Emtriva, and Tibotec Pharmaceuticals’ Edurant. • Emtriva: An oral formulation of a nucleoside analog reverse transcriptase inhibitor, dosed once a day as part of combination therapy to treat HIV infection in adults. • 2. Liver Disease • Viread: An oral formulation of a nucleotide analog reverse transcriptase inhibitor, dosed once a day for the treatment of chronic hepatitis B in adults. • Hepsera: An oral formulation of a nucleotide analog polymerase inhibitor, dosed once a day to treat chronic hepatitis B in patients 12 years of age and older.

4. Product Line (Cont.) • Cardiovascular • Letairis: An oral formulation of an endothelin receptor antagonist (ERA) indicated for the treatment of pulmonary arterial hypertension. • Ranexa: An extended-release tablet for the treatment of chronic angina. • Lexiscan/Rapiscan: An injection is indicated for use as a pharmacologic stress agent in radionuclide myocardial perfusion imaging (MPI), a test that detects and characterizes coronary artery disease, in patients unable to undergo adequate exercise stress. • Respiratory • Cayston: An inhaled antibiotic for the treatment of respiratory systems in cystic fibrosis (CF) patients 7 years of age and older with Pseudomonas aeruginosa (P. aeruginosa). • Tamiflu: An oral antiviral available in capsule form for the treatment and prevention of influenza A and B. • Other • AmBisome: A proprietary liposomal formulation of amphotericin B, an antifungal agent to treat serious invasive fungal infections caused by various fungal species in adults. • Vistide: An antiviral injection for the treatment of cytomegalovirus retinitis in adult patients with AIDS. • Macugen: An intravitreal injection of an anti-angiogenic oligonucleotide for the treatment of neovascular age-related macular degeneration.

5. Product Sales

6. Pipeline

8. Summary of Business Strategy • Diversify Portfolio Thru Acquisitions • Gain product approvals internationally • Extend presence in high margin markets, such as HIV/AIDS • Continue to maintain stellar profit margins through inexpensive manufacturing, small sales force, and selective R+D

9. Financial Overview

10. Financial Analysis

11. Financial Analysis: Valuation Ratios

12. Discounted Cash Flow Analysis • We used the following assumptions to generate the weighted average cost of capital for GILD • Beta: 0.45 • Risk-free rate: 3.3% • Cost of equity: 9.8% • Cost of debt: 7.0% • Conservative WACC: 8% • Our Fair Value: $61 • Morningstar DCF estimates yield a similar fair value of $57.14

13. Analyst Estimates

14. Catalysts • The European Association for the Study of the Liver decides that it will disclose hepatitis C clinical data online on April 4th • Earnings reports on April 18th, announcement of the drug Quad • Further clinical experimentation to verify the results of three clinical trials with Truvada, which suggest healthy people should take HIV drugs to prevent infection with the virus that causes AIDS • The market for hepatitis C drugs is expected to soar to $16 billion in 2015 from $1.7 billion in 2011 in major commercial markets. Gilead has well positioned itself in the Hepatitis C drug market by acquiring Pharmasset

15. Risks • The public announcement of data from clinical studies evaluating GS-7977 in HCV-infected patients is likely to cause significant volatility in stock price. • A substantial amount of generated revenue is derived from the HIV/AIDS division of the company • Implementation of health care reform will detrimentally affect profits • Operations depend on compliance with complex FDA and comparable international regulations. • Industry is competitive and there will be increasing competition and pricing pressures in growing/attractive markets, such as HIV.

16. Conclusions • Huge market overreaction in February to clinical trail data • 1) Diversified, stable cashflow • 2) Promising drug pipeline • 3) Extremely attractive metrics • In conclusion, GILD is a low beta stock that would be an excellent addition to the YSIG portfolio.