William Blair comments positively on Gilead Sciences, Inc. (NASDAQ:GILD) and Red Hat Inc (NYSE:RHT)


William Blair sees huge growth opportunity for Gilead Sciences, Inc. (NASDAQ:GILD) in its deal with Galapagos (GLPG)

Gilead Sciences, Inc. (NASDAQ:GILD) and Galapagos NV (ADR) (NASDAQ:GLPG) have entered into a partnership in which they will work jointly to develop and market a treatment for autoimmune diseases called filgotinib. The experimental drug recently concluded Phase 2 trial and is slated to enter the next phase of testing – Phase 3 after discussions with the regulators.

As part of the agreement, Gilead Sciences, Inc. (NASDAQ:GILD) will pay $725 million upfront to Galapagos, part of which is license fee and another equity investment. License fee is $300 million and the rest ($425) million is equity investment, which represents about 15% of ownership in Galapagos.

The agreement also spells out that Galapagos will receive milestones to the tune of $1.35 billion from Gilead.

In exchange, Gilead is getting the opportunity to both diversify its revenue streams and expand into the lucrative autoimmune disease market. According to William Blair, the sale of autoimmune treatments totaled more than $30 billion last year. The firm says that autoimmune treatment market is not only huge but also expanding rapidly.

The deal with Galapagos is also important in diversifying Gilead Sciences, Inc. (NASDAQ:GILD)’s revenue sources. The company currently generates nearly 90% of its revenue from the sale of HCV and HIV products, at least, going by the 3Q2015 figures.

William Blair terms Red Hat Inc (NYSE:RHT)’s 3Q strong and clean:

Following Red Hat Inc (NYSE:RHT)’s strong F3Q2016 in which both revenue and EPS exceeded estimates, William Blair has expressed more confidence in the company’s future.

In particular, William Blair believes that Red Hat Inc (NYSE:RHT) is favorably placed to benefit from the secure trends in hybrid cloud and open source software sectors.

Red Hat Inc (NYSE:RHT)’s 3Q revenues exceeded the consensus by $2 million and EPS surpassed expectation by $0.02/share.

The management of Red Hat Inc (NYSE:RHT) is exuding hope for a better future, guiding fiscal 2016 revenues above the consensus estimate. Revenue for the year is expected to come in between $535 and $539 million, which at the midpoint is about $4 million above the Street estimate for fiscal 2016.

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