Gilead (NASDAQ:GILD) Says No To Dividend Payments

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By Hanson So on November 27, 2014 BioPharma

Gilead Sciences, Inc. (NASDAQ:GILD) has become every investor’s dream come true. The company has gone on to display remarkable figures on the charts over the past two years. So impressive is its performance that the share price has gone up an impressive 324%.

Gilead (NASDAQ:GILD) has managed to obtain the statues of leaders in its market. It has joined the league of the absolute masters, such as Amgen (NASDAQ:AMGN), Sanofi (NYSE:SNY), and Merck & Co. (NYSE:MRK).

However, what sets Gilead (NASDAQ:GILD) apart from its contemporaries is its lack of offering dividends to investors. In light of the company revenues undergoing an increment by 200% in 2014, when compared with last year’s figures, it was largely expected of the company to pay dividends on its huge hepatitis C market.

The dividend generated in May this year have been strategized to be used to invest a hefty $5 billion to buy back its shares. The hopes of company awarding its dividends are shattered even more when considering the fact that the company’s top officials have failed to state any such plans. It may be an unwise decision on Gilead (NASDAQ:GILD)’s part, however, the company seems steadfast on this front.

Gilead (NASDAQ:GILD) has recently purchased 12 clinical-stage bio-pharma. These acquisition have been guided by the CEO John Martin with the strategy of diversifying the products in the pipeline to strengthen its HIV franchise that sits at the core of the company motto.

The strategy seems to have worked in Gilead (NASDAQ:GILD)’s favor, when one considers the range of products available commercially that fall in the cardiovascular, oncology, hepatitis C and respiratory categories, in addition to the company’s continues efforts towards growing its HIV branch.

This strategy, coined M&A, however, has left the company way behind its market peers when the advancement is compared in terms of capital returns.

In the year 2011, when Gilead (NASDAQ:GILD) was at its peak in terms of capital reserves, Martin decided to acquire Pharmasset on the basis of its hepatitis C drug, called Sofosbuvir that was still in experimental phase. A significant amount of $11.2 billion was spent on this acquisition which left Gilead (NASDAQ:GILD) completely depleted on its capital reserves.

This acquisition, however left Gilead (NASDAQ:GILD) the winner, as the company went on to launch the drug under a new name, Sovaldi that produced immense sales in its wake. Harvoni, another drug is a successor of Sovaldi, and is being considered the next-gen hepatitis C treatment. The acquisition that was risked by Martin played quite well for Gilead (NASDAQ:GILD), however the company has never been able to revive its cash status ever since.

A lot is being expected of Harvoni. If it succeeds in meeting the margins that the comoany is currently targeting, it is expected to help Gilead (NASDAQ:GILD) retain its capital status within a year, give or take a few months.

However, even after these projections; a dividend is unlikely. Gilead (NASDAQ:GILD) has proved itself a worthy competitor by using its cleverly planned strategies at the right time.