Gilead Case Analysis

In 2021, Eirene Kontopoulos was considering whether Fidelity should expand its stake in Gilead. In thinking about this question, she was particularly interesting in examining the management decisions of Gilead.

Looking at the history of the firm, she noted that between 2014 and 2020, the firm's success in HIV and hepatitis-C, resulted in between $25 and $30 billion per year in revenues.

Before she could recommend whether Fidelity should expand its position in Gilead, she wanted to understand how the firm had allocated this historic windfall. She felt this provided important insight into how the firm would operate going forward.

As part of this process, Kontopoulos has asked you to summarize the firm's capital allocation over this time period. Please write a 2-3 page memo (not including exhibits) containing your analysis.

In drafting this memo, please make sure to address the following questions:

1. What major capital allocation decisions did Gilead make between 2014 and 2020? Do you believe these were wise decisions? If so, why? If you believe that they were unwise, what other options would you have recommended to management?
2. Kontopoulos in particular would like an evaluation of the Immunomedics acquisition. Was this a good decision? How would it create value for Gilead's shareholders? (I have included a shell model that you can use to think about this acquisition, but you do not need to submit any model).
3. From 2010 - 2021, Gilead made 3 acquisitions of more than $10 billion. Compare and contrast the sources of value creation from these mergers.