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Recently, the board of directors at Gilead Sciences Inc. (GILD - Analyst Report) authorized a two-for-one stock split. The action, which will take shape through a stock dividend for stockholders as on record on January 7, 2013, is aimed at increasing  the number of authorized shares at Gilead to about 1.52 billion from 759.3 million (as of November 30). The stock dividend is expected to be distributed to the relevant stockholders on or about January 25, 2013.

Following the stock split, every shareholder at Gilead (on record on January 7, 2013) will get an additional share for each share he/she currently holds. Gilead intends to commence trading at the NASDAQ at the post-split price from January 28, 2013. Gilead in its press release further stated that purchasers of its shares between January 7 and January 28, 2013 will get a due-bill. The due bill will make the buyer eligible for an additional share for each share bought.

We note that shares of Gilead Sciences have been on an uptrend since the beginning of the year driven by multiple positive catalysts, including the purchase of Pharmasset, targeting the lucrative hepatitis C virus (HCV) market and the approval of the high potential HIV therapy, Stribild. The stock is currently hovering around its 52-week high of $76.28, reached on November 23, 2012. We believe that the soaring stock price necessitated the 2-for-1 stock split.

Apart from the positive developments noted above, Gilead received further good news last month when it presented encouraging top-line data on its HCV candidate sofosbuvir from a phase III study. Sofosbuvir (formerly GS-7977) was added to Gilead’s pipeline through its acquisition of Pharmasset in January 2012.

Apart from Gilead, companies such as Abbott Laboratories (ABT - Analyst Report), Johnson & Johnson (JNJ - Analyst Report) and Bristol-Myers Squibb (BMY - Analyst Report) are also developing therapies to combat HCV.

Our Recommendation

We currently have a Neutral recommendation on Gilead. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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