Shares of Gilead Sciences (GILD ) are sliding after Leerink analyst Geoffrey Porges downgraded the stock to Market Perform, saying he is now "outright bearish" on the company's Hepatitis C virus business. This comes on the heels of recent M&A speculation that was sparked by a Gilead debt offering.

BEARISH ON HCV BUSINESS: Leerink's Porges downgraded Gilead to Market Perform from Outperform and lowered his price target for the shares to $94 from $112. The analyst told investors in a research note that he is now "outright bearish" on the company's Hepatitis C virus, or HCV, business as he expects revenues to decline "faster and farther" than the current consensus estimates forecast. The HCV market in the U.S. appears to be in "steady secular decline," and similar trends are occurring in most other countries, he contended. Porges has reduced his Gilead HCV revenue forecast by 17% in 2017, and then by 20%-25% in later periods, which amounts to a $2B-$2.5B cut in expected sales for each year after 2017. Nonetheless, the analyst noted that his view of Gilead's HIV business remains positive and materially above consensus.

DEBT OFFERING: Two weeks ago, Gilead Sciences priced a $5B debt deal, saying it intends to use the net proceeds for general corporate purposes, including possible "future acquisitions." Commenting on the debt offering, Jefferies analyst Brian Abrahams told investors he believes the prospectus language seems to suggest M&A may be imminent. An acquisition deal and potential positive pipeline data "would re-energize the story and generate upside," the analyst contended, adding that there could be assets that would help offset Gilead's Hepatitis C declines, improve earnings per share, and increase potential discounted cash flow-based valuation. Gilead's debt offering also sent shares of TESARO (TSRO) and Clovis Oncology (CLVS) higher at the time on takeover rumors. TheStreet's Adam Feuerstein noted that both companies could be takeover targets for Gilead following Pfizer's (PFE) acquisition of rival Medivation (MDVN). Gilead chief scientific officer Norbert Bischofberger had confirmed to Feuerstein that the company did attempt to acquire Medivation but abandoned the bidding on price.

PRICE ACTION: In morning trading, Gilead has dropped almost 2% to $79.02 per share.