Ladenburg Thalmann & Co. Inc.

1 ea c1enc es, nc.
GILD-$28-NASDAQ
Recommendation: Buy
Quarterly Expectation
Price 52-Week EPS (FY December) P/E Q4 Ending December
1/14/97 Range 1996E 1997E 1998E 1997E 1998E Current Year Ago DivNid
$28 $42 1/2-$16 1/4 $(0.70)
$(0.80) $(0.25) n.m. n.m. $(0.31) $(0.48)Nil
Consensus: $(0.63) $0.23 Consensus: $(0.15) Source: First Call
DJIA: 6762 S&P 500: 769 Approx. Reporting Date: 1/31/97
Capitalization 9/30/96A Market Data
Millions Percent Shares Outstanding (Mil): 30.5
Long-Term Debt: $1.5 0.5o/o Market Capitalization (Mil): $854
Shareholders' Equity: $298.0 99.5/o Avg. Daily Trading Vol.: 215,800
Total: $300.0 100.0/o Institutional Ownership: 60/o
Other Data
Book Value Per Share: $9.75 1997E Cash Flow Per Share: ($0.55)
1997 Est. ROE: n.m. 1997E EBITDA Per Share: ($0.95)

Summary and Investment Conclusion

We are initiating coverage of Gilead Sciences, Inc. GI LOO SCI tiCS (GILD) Jan 10. 1997 ... 27 718
(GILD), Foster City, California, with a Buy 45
96 97 45

recommendation. In our view, this stock represents 40 40

the opportunity to invest at an attractive price in the 35 35
biotechnology sector through a company that has
30 30
developed a large pipeline of products based on
25 25
cutting-edge technology and targeted for
20 20
applications that include some with considerable
commercial potential, such as treatments for HIV 15 15

infection, hepatitis B, herpes simplex (type 2) 10 10

infection, and influenza. The company has close to 5---------------------- -- ----------- ---- ------ ----------------------- - ------ ---- --321.000
__

$300 million in cash of its own with which to finance 0 0

Har Hay Jul Sep Nov Jan Har Hay Jul Sep Nov Jan
its development work that also benefits from
alliances with major drug firms such as Glaxo Chart Courtesy of Baseline.
Wellcome (GLX-$31 1/4-Not Rated}, Hoffmann-La
Roche (ROG-SF10,73 5-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 100/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 pharmaceutica ls 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. 9

Candidate Product Target Indications Development Status Worldwide Rights

.. . .- .-
:

VISTIDE (cidofovir injection) CMV Retinitis Commercial in U.S. Gilead, Pharmacia,

Approval in E. U. expected and Upjohn
early 1997

Roferon-A (interferon alfa-2a) Chronic hepatitis C Commercial in U.S. Roche

FORVADE TM (cidofovir topical gel) Herpes Simplex Virus US approval expected 1997 Gilead
HPV-Genital Warts Phase 1/11 Gilead

GS 840 Oral (adefovir dipivoxil) H IV-AIDS + CMV retinitis Phase II/III, pivotal Gilead
Hepatitis B Virus Phase 1/11 Gilead

Cidofovir Intraocular CMV Retinitis Phase 1/11 Gilead

Cidofovir Topical Ophthalmic Viral Keratoconjunctivitis Phase II AHP/Storz

GS 930 IV and Oral CMV Retinitis Phase I Gilead

Other Herpes Viruses Preclinical Gilead

PMPA IV HIV-AIDS Phase I Gilead

PMPA Oral HIV-AIDS Clinical Candidate Gilead

Protease Inhibitor HIV-AIDS Preclinical Gilead

GS 41 04 Analogues Oral Influenza Clinical candidate Roche

GS 522 and Derivatives Anticoagulation for Bypass, Preclinical Gilead

Thrombolytic Adjunct

Protein C Activator Angioplasty, Thrombolysis Preclinical Gilead

A3 Receptor Regulators Stroke Preclinical Gilead/NIH

Antisense and Triple Helix Cancer, Viral Infections, Research Gilead and
Compounds Cardiovascular Disease Research Glaxo Wellcome

Source: Company data.

Gilead Sciences, Inc.