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Why Gilead (GILD) Might Not Make an Oncology Buy After All



8/16/2017 5:45:48 AM

Why Gilead Might Not Make an Oncology Buy After All August 16, 2017
By Mark Terry, BioSpace.com Breaking News Staff

It’s one of the top questions in biopharma—when is Gilead Sciences (GILD) going to buy something? Keith Speights, writing for The Motley Fool, asks it again, only this time one of the possible answers is, “Maybe never.”


On May 2, in the company’s first-quarter financial reporting total revenues were down. Which has been something of a trend, largely because the company’s blockbuster hepatitis C (HCV) franchise is losing market share the most. The company’s HCV drugs are so effective they’re creating a smaller pool of patients, and other companies are eating away at the existing market. This is behind most investors’ urging them to acquire something, sooner than later.

At the same time, the company has indicated it was interested in an oncology acquisition to boost the company’s overall revenues and pipeline.

But Gilead’s chief executive officer John Milligan recently talked to Leerink analyst Geoffrey Porges, and said that Gilead “might end up doing nothing in oncology.”

What? Why?

Speights reports that the issue may be that Gilead’s interest in a deal that is “transformative” might not be possible, at least not right now, because there aren’t any good prospects for that role. And Milligan isn’t interested in a smaller biotech investment if it doesn’t significantly make a change to Gilead’s growth soon.

It’s a reasonable analysis. There just aren’t that many smaller oncology companies that would step on the gas for Gilead. Speights notes that Incyte (INCY) is probably the best bet. “Jakafi is already a winner in treating myelofibrosis and polycythemia vera,” Speights writes. “Late-stage pipeline candidate epacadostat is one of the most eagerly anticipated immunotherapies in development.”

The list of potential oncology buys after Incyte become less enticing quickly. Exelixis (EXEL) has Cabometyx, Cometriq and Cotellic, and has a market cap of $8 billion. Speights writes, “There should be a lot for Gilead to like about Exelixis, but the big biotech might not think an acquisition of the company would be transformative enough. Buying any of the many cancer-focused biotechs smaller than Exelilxis wouldn’t be all that transformative, either.”
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So if Milligan is telling Porges an oncology deal isn’t likely, will the company look to another market? Maybe. The company has shown an interest in inflammation and non-alcoholic steatohepatitis (NASH). To be fair, NASH is an area of unmet need with an enormous market, so Gilead is hardly the only company interested in that area. Allergan (AGN), for example, in late 2016 picked up Tobira Therapeutics (TBRA) for $1.695 billion and Akarna Therapeutics for $50 million upfront, both for their NASH programs.

Gilead has three products in its NASH pipeline—selonsertib, GS-9674, and GS-0976. And at least one source places the NASH market, which overlaps with the obesity and diabetes market, at $30 billion. Incyte, by the way, also has an interest in NASH.

If Gilead wanted to go into the rare disease market, which companies often do because of the high margins and high prices, Vertex Pharmaceuticals (VRTX) and BioMarin (BMRN) would be solid prospects. Speights writes, “BioMarin would be the least costly deal for Gilead, with its current market cap of less than $15 billion. However, Vertex would arguably be the more transformative acquisition. Despite its market cap of around $39 billion, Vertex’s sizzling growth prospects make it a reasonable value, as well.”

Nobody, perhaps, but Milligan knows what the company’s real plans are, if any. Speights writes, “Whatever happens, Gilead Sciences must do something to reignite growth. With its falling hepatitis C sales, Gilead’s other drugs and current pipeline won’t be enough to run things around for the once high-flying biotech. The company might end up doing nothing in oncology, but doing nothing at all isn’t an option that Gilead’s investors will accept.”


Read at BioSpace.com


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