Why Gilead and Roche Should Take a Good Look at Clovis Oncology as Possible M&A Target

Why Gilead and Roche Should Take a Good Look at Clovis Oncology as Possible M&A Target
October 6, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Analysts are once again citing Boulder, Colo.-based Clovis Oncology as a hot target for acquisition.

Clovis focuses on cancer drugs and has had several recent successes in clinical trials. On Sept. 9, 2015, the company announced two major regulatory milestones for roceletinib for the treatment of non-small cell lung cancer (NSCLC). In particular, the drug appears effective in NSCLC patients with the EGFR T790M mutation. Two other drugs, Iressa by AstraZeneca PLC , and Tarceva, by Genentech , target EGFR. But, in patients with the T790 mutation, the drugs are ineffective. Roceletinib appears effective in wildtype EGFR mutation NSCLC and in the T790 mutations.

Rocletinib received priority review status from the FDA. A final decision is scheduled for March 30, 2016. It has also been granted accelerated assessment status by the European Medicines Agency (EMA).

In May, Clovis reported positive Phase II results from two studies in ovarian cancer with the drug rucaparib, a PARP inhibitor. This drug, in particular, appears to be a potential best-in-class medication. It expects to file with the FDA in 2016.

The company also has Lucatanib, which is being studied for breast and lung cancers.

Clovis considered a sale in 2013, but nobody bit, probably because, despite positive data, the company’s drugs were in early stage trials. Now that the company’s products are closer to approval and look very promising, analysts are taking another look.

Terence Flynn, an analyst with Goldman, Sachs & Co., projected a 30 percent chance in April that Clovis would get picked up by a bigger company. Flynn guessed at $179 per share, which was almost double the company’s share price at the time.

Typically the two potential buyers that analysts are watching are Gilead Sciences, Inc. and Roche . Gilead has been expanding its interest in cancer as its hepatitis C portfolio ages. Gilead has seven cancer drugs in its pipeline, and an acquisition of Clovis would further strengthen its position in the oncology market. In May, Gilead acquired EpiTherapeutics ApS, a privately-held Danish company that focuses on cancer. It acquired the company for $65 million.

On the other hand, analysts are always speculating on Gilead’s next acquisition. In late August, they speculated that Gilead would acquire Company . Earlier in the month, analysts wondered if Gilead would acquire New Haven, Conn.-based Achillion Pharmaceuticals, Inc. .

Analysts also speculate that Roche might acquire Clovis. Roche is the largest maker of cancer drugs with sales of $30 billion annually of oncology medications. More than a third of its 2014 sales, 41.2 percent, come from three of its cancer drugs, Avastin, Herceptin and Rituxan. All face patent expirations or have already lost patent protection. Rituxan’s European patent ran out in 2013 and its U.S. patent will end in 2018. Herceptin’s European patent expired in 2014 and will end in the U.S. in 2019.

Clovis and Roche/Genentech recently signed a deal to study rociletinib with Genentech’s atezolizumab. Writing for BidnessEtc, Hannah Ishmael notes that if the clinical trial is promising, Roche has the money to buy Clovis. She also points out that if the company’s drugs get approval, the stock will jump and be a lot more expensive than it is now.

Clovis has been mostly on the increase, although it dropped recently. Shares traded for $46.77 on Dec. 1, 2014, rose to $92.85 on April 15, 2015, and to $100.40 on May 14, 2015. Shares dropped off to $67.02 on Aug. 24, then spiked to $114.64 on Sept. 17. They are currently trading for $91.22 per share.

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