Gilead Sciences to payout dividends putting pressure on other Bio-tech companies

Biotech Industry Company has factually been disinclined to initiate paying out dividends and mostly inclined towards expenditure on developing internal candidates. There has been a hitch in the practice since Amegen Inc. and Gilead sciences, Inc. (GILD) started to offer dividends to the shareholders.

Shareholders may very soon witness some other available options such as Regeneron Pharmaceuticals Inc. Presently, Regeneron gets majority of its revenue from sales of Eylea drug, which is intended to treat problems such as wet age related macular deterioration and also macular edema, has lately received the United States Food and Drug Administration commonly known as FDA approval to treat an eye disease called diabetic retinopathy among sugar patients. The decision of FDA proposes that there is a probability that Eylea will be able to get further approval for some more signs.

Moreover, Regeneron has some possible clinical contenders in its tube, like alirocumab a drug for treating cholesterol patients which has potential to be a blockbuster.  The pharmaceutical company’s other drugs have also established early clinical efficacy, causing us to believe that there is a possibility that the sales of its Regeneron  will be able to make enough cash which will be used to pay dividends. In the last quarter the company reported $648.7 million of cash and cash equivalents on its financial statement.

Another contender to start paying dividend is Alexion Pharmaceuticals Inc. providing that it now commands enormous premiums for its innovative medicines causing heavy margins. Moreover, due to the reason that the company functions in rare disease market without any big competition will be able to survive on its higher revenue stream, in spite of the approaching Soliris drug patent expiry – the most expensive drug over the globe. Alexion till the last quarter had cash and its equivalent assets of around $1.96 billion. The company owes a small amount in debt of around $165 million which arrived at $1.8 billion of cash flow. Moreover, the company generates operating cash flow of $640 million in 2014’s last quarter. The earnings of the company is most likely to multiply in the next four years to earnings of $10.60 per share.

Another top bio-tech firm in the industry, Celgene Corporation will also start paying dividends which makes it two out of four big companies to initiate dividend payout. The management of the company is more motivated to pay dividends as it has used its cash in the past years to buy back shares. The earnings of Celgene is growing by more than 20% since 2010.

Gilead sciences stock closed at $99.87 on Wednesday.