I remain long and very optimistic about the prospects for Gilead Sciences' stock. One of the reasons for my bullishness was a likely Genzyme deal. A deal now looks even more likely given recent developments, as the two parties are holding friendly talks.
The higher the price of the deal the better short term sentiment will be, but I do not believe that is the most important aspect of the deal. If Genzyme gets taken out more than ten percent of the large cap biotech sector will disappear. I believe that decrease in supply is bullish for the entire sector.
Gilead had over $2.5 billion remaining on its share repurchase plan as of the end of the third quarter. At the JPMorgan Healthcare Conference Gilead management reiterated their intention to finish the repurchase by the end of 2011. That would amount to buying approximately 8% of their shares outstanding at current prices. I believe the attractive valuation combined with the favorable supply/demand equation for Gilead's shares will equal higher prices.