Ladenburg Thalmann & Co. Inc. 3

• • 1 ea c1ences, nc.

GILD-$28-NASDAQ Recommendation: Buy

Price 1/14/97

$28

52-Week EPS (FY December) Range 1996E 1997E 1998E

$42 1/2-$16 1/4 $(0.80) $(0.70) $(0.25) Consensus: $(0.63) $0.23

DJIA: 6762 S&P 500: 769

Capitalization 9/30/96A Millions

Long-Term Debt: Shareholders' Equity: Total:

Book Value Per Share: 1997 Est. ROE:

$1.5 $298.0 $300.0

$9.75 n.m.

Summary and Investment Conclusion

Percent 0.5o/o

99.5°/o 1 00.0°/o

Quarterly Expectation P/E Q4 Ending December

1997E 1998E Current Year Ago DivNid n.m. n.m. $(0.31) $(0.48) Nil

Consensus: $(0.15) Source: First Call Approx. Reporting Date: 1/31/97

Market Data Shares Outstanding (Mil): Market Capitalization (Mil): Avg. Daily Trading Vol.: Institutional Ownership:

Other Data 1997E Cash Flow Per Share: 1997E EBITDA Per Share:

30.5 $854

215,800 60°/o

($0.55) ($0.95)

We are initiating coverage of Gilead Sciences, Inc. (GILD), Foster City, California, with a Buy recommendation. In our view, this stock represents the opportunity to invest at an attractive price in the biotechnology sector through a company that has developed a large pipeline of products based on cutting-edge technology and targeted for applications that include some with considerable commercial potential, such as treatments for HIV infection, hepatitis B, herpes simplex (type 2) infection, and influenza. The company has close to $300 million in cash of its own with which to finance its development work that also benefits from alliances with major drug firms such as Glaxo Wellcome (GLX-$31 1/4-Not Rated}, Hoffmann-La

GI LOO SCI £tiC£S (GILD) Jan 10. 1997 ... 27 718

45 96 97 45

40 40

35 35

30 30

25 25

20 20

15 15

10 10

5------------------------ ----------- ---- ------ ------------------------ ------ ---- -- _§_ 321.000

0 Har Hay Jul Sep Nov Jan Har Hay Jul Sep Nov Jan 0

Chart Courtesy of Baseline.

Roche (ROG-SF10,735-Not Rated), as well as Pharmacia & Upjohn (PNU-$41-Not Rated).

The first of its products is already on the market, and we expect Gilead to attain over $100 million in revenues and turn profitable by 1999. With four additional product approvals likely in the coming four years, we project that the company's revenues will exceed $200 million by 2000 and rise rapidly thereafter, with EPS growing from about $0.85 in 1999 to the $1.85 range in 2000. The stock has been trading in the $25 range, at which level we think it is undervalued, and we recommend it as a Buy with a one-year price target of $40 and an estimated four-year price appreciation potential of about 1 00°/o to $55 in 2000.

We are being very conservative in this report with regard to the market penetration we assume for the company's products. Furthermore, we have not factored into our projections the potential for considerable off-label uses of some of these products nor have we included the ever-present possibility of mergers or acquisitions that exists in the pharmaceuticals industry. As a result, we believe there is significant upside potential to our price projections for this stock.

Gilead Sciences, Inc.

Ladenburg Thalmann & Co. Inc.

.

Candidate Product Target Indications

VISTIDE® (cidofovir injection) CMV Retinitis

Roferon®-A (interferon alfa-2a) Chronic hepatitis C

FORVADE TM (cidofovir topical gel) Herpes Simplex Virus HPV-Genital Warts

GS 840 Oral (adefovir dipivoxil)

Cidofovir Intraocular

Cidofovir Topical Ophthalmic

GS 930 IV and Oral

PMPA IV

PMPA Oral

Protease Inhibitor

GS 41 04 Analogues Oral

GS 522 and Derivatives

Protein C Activator

A3 Receptor Regulators

Antisense and Triple Helix Compounds

Source: Company data.

H IV -AIDS + CMV retinitis Hepatitis B Virus

CMV Retinitis

Viral Keratoconjunctivitis

CMV Retinitis Other Herpes Viruses

HIV-AIDS

HIV-AIDS

HIV-AIDS

Influenza

Anticoagulation for Bypass, Thrombolytic Adjunct

Angioplasty, Thrombolysis

Stroke

Cancer, Viral Infections, Cardiovascular Disease

Development Status

Commercial in U.S. Approval in E. U. expected early 1997

Commercial in U.S.

US approval expected 1997 Phase 1/11

Phase II/III, pivotal Phase 1/11

Phase 1/11

Phase II

Phase I Preclinical

Phase I

Clinical Candidate

Preclinical

Clinical candidate

Preclinical

Preclinical

Preclinical

Research Research

9

Worldwide Rights

.. . .- .-:

Gilead, Pharmacia, and Upjohn

Roche

Gilead Gilead

Gilead Gilead

Gilead

AHP/Storz

Gilead Gilead

Gilead

Gilead

Gilead

Roche

Gilead

Gilead

Gilead/NIH

Gilead and Glaxo Wellcome

Gilead Sciences, Inc.