In a research report issued Thursday, analyst Y Katherine Xu of William Blair assumed coverage on shares of Gilead Sciences, Inc. (NASDAQ:GILD). Xu underscored forthcoming catalysts and explored critical components, which might influence shareholder value, including the company’s HIV and HCV franchises and the Kite Pharma acquisition.

Following the biotech giant’s recent takeover of Kite Pharma, including $2 per share in net cash at mid-2018, the analyst assumes an Outperform rating on GILD with a fair value estimate of $87.00, representing a near 4% rise from where the shares last closed. (To watch Xu’s track record, click here)

The recent Kite acquisition was “a highly anticipated move to regenerate growth, and we view the cell therapy area as relatively uncharted waters with vast opportunity and measured risks, Gilead’s move into this area signals leadership establishment and continued consolidation going forward,” underscores Xu.  Looking back, the wildly successful launch of Gilead’s hepatitis C virus drug in 2015, which captured 80% of the US HCV market “was matched only by the equally rapid souring on the market outlook […] the HIV and HCV franchises will continue to generate strong, but declining revenue and cash flow until the 2030-2033 time frame,” says the analyst.

For this reason, pointing out that “shares might have bottomed over the past two months,” Xu believes it all the more important that the giant acquired Kite Pharma at an opportune time, noting confidence that “the Kite acquisition and the establishment of leadership in the cellular therapy arena could drive long-term growth from 2021 toward 2030 with stable to improving margins by adding $4.2 billion in peak sales.”

Highlighting two GILD products currently in late stages of the pipeline, specifically filgotinib and selonsertib as a potential source of $10.9 billion revenue in combined peak sales, the analyst emphasizes, “we believe there is insufficient value ascribed to the pipeline and relatively low expectations on the leading late-stage assets filgotinib and selonsertib.”

Providing a valuation overview of Gilead’s pipeline, Xu places HIV at $49 per share and HVC at $14 per share. With regard to filgotinib, the analyst values the Phase III drug candidate at $4 per share with an 85% probability of success in the indication of rheumatoid arthritis; when it comes to evaluating the drug candidate’s probability of success in the indication of both ulcerative colitis as well as Crohn’s disease, the analyst assigns a 70% probability of success. Assessing late-stage asset selonsertib, the analyst values the Phase III drug candidate at $5 per share in advanced Non Alcoholic Fatty Liver Disease, or Nonalcoholic Steatohepatitis (NASH), assigning a 70% probability of success.

Gilead swallowing up Kite Pharma is worthy of note, concludes Xu, who emphasizes the compelling value of “market-ready asset” and CAR-T cancer therapy candidate axi-cel, designed to treat aggressive Non-Hodgkin’s Lymphoma (NHL). With this in mind, the analyst values this acquisition, complete with other “next-generation” product candidates altogether at $13 per share.

TipRanks analytics exhibit GILD as a Buy. Out of 15 analysts polled by TipRanks in the last 3 months, 11 are bullish, while 4 are sidelined on Gilead stock. With a potential upside of 2%, the stock’s consensus target price stands at $85.46.