QS Research · Michael Burry's Scion Capital analyst template · 2006
GILEAD SCIENCES, INC. (GILD)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction medium · base case -35% · downside -46% · upside -1%
Gilead's reported TTM loss is an acquisition-accounting artifact: TTM EBIT is -$2.36B and net income -$3.86B, but TTM operating cash flow is $14.48B and free cash flow $13.78B (N12, N15, N16, N18). I keep section 13's FY2020-FY2025 normalized FCF base of $8.98B and price it at today's 6.7% FCF yield rather than a peer EV/EBITDA band, because rule 1 requires the company's own multiple today. At the same 6.7% yield, normalized average FCF is $108/share (-35% vs $166.89), the FY2023 trough FCF is $89/share (-46%), and even TTM FCF is only $165.8/share (-1%) (N1, N18, S2). The $1.5B Biktarvy 2028 Medicare headwind and one-way insider selling are non-valuation catalysts; I short, with normalization doing most of the work ($8.98B normalized FCF vs $13.78B TTM).
Key numbers
- Share price: $166.89
- Market cap: $207.00B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $30.99B
- Price / book: 15.87x
The 15 boxes
- ✓ 1. Long-form business notes
Gilead is a >30-year biopharma selling branded HIV, liver-disease, oncology/cell-therapy and other products, mostly through three U.S. wholesalers, plus royalties and contract revenue. FY2025 revenue was $29.44B with operating income $10.02B, net income $8.51B and operating cash flow $10.02B, versus FY2020 revenue $24.69B, operating income $4.07B, net income $123.0M and operating cash flow $8.17B. The product list shifted between the FY2020 and FY2025 10-Ks: newer HIV prevention/treatment assets such as Yeztugo and Sunlenca and liver asset Livdelzi appear in 2025, while older HIV, HCV and other products named in 2020 are not named in 2025. Earnings are cyclical: FY2024 operating income fell to $1.66B and net income to $480.0M on $28.75B revenue, then rebounded in FY2025.
- ✓ 2. Competitive advantage
Gilead's edge is patent-protected HIV antivirals layered on a large, cash-generative commercial base — not a stable margin. Revenue rose every year FY2020–FY2025 ($24.69B to $29.44B) but operating income swung from $10.02B in FY2025 to $1.66B in FY2024, while operating cash flow never fell below $8.01B in those six years on capex of $523M–$728M. The protection is dated: Biktarvy has U.S. settlement cover to April 1, 2036 and the lenacapavir franchise (Sunlenca, Yeztugo/Yeytuo) runs to 2037, but several non-HIV products lose U.S. or EU protection between 2027 and 2032. Pricing, not just efficacy, is the competitive battleground, with insurer/payer pressure and the December 2025 U.S. government MFN agreement constraining net price.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended Sep 30, 2026) total revenues were $8,300M, up 7% from $7,769M, with product sales up 13% to $8,289M and royalty/contract/other revenue down to $11M after a $400M IP-sale item in Q3 2025 did not repeat. Growth is concentrated in HIV (+18% to $6,249M, including Yeztugo $305M vs $39M) and Trodelvy (+42% to $506M), offset by Veklury -69% and Cell Therapy -18%; product gross margin rose to 81.0% from 78.6%. Q3 net income fell 20% to $2,429M (EPS $1.94 vs $2.43) on a $164M equity-securities loss versus a $483M gain a year earlier, higher R&D/SG&A and a 20.7% tax rate; the nine-month GAAP figure is a $6,045M loss because of $11.3B of acquired IPR&D and a $1.75B IPR&D impairment booked in Q2 2026, not Q3. Cash ended at $6,437M against $7,564M at Dec 31, 2025, FY2026 product sales guidance was raised to $31.0-31.3B, and the Biktarvy Medicare Maximum Fair Price set in October 2026 begins hitting revenue January 1, 2028.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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