World's Smartest Billionaire Upped Position in This Bay Area Biotech

March 15, 2017
By Alex Keown, BioSpace.com Breaking News Staff

FOSTER CITY, Calif. – Gilead Sciences recently received some strong backing by a well-known investor.

Jon Simons, who was dubbed the “world’s smartest billionaire” by the Financial Times and is the founder of Renaissance Technologies fund, is displaying a “bullish attitude” toward Foster City-based Gilead Sciences, Smarter Analyst reported this morning. Simons’ investment fund has increased its stake in the company by 171 percent. The fund holds 5.2 million shares of Gilead with a value of about $377.7 million. Shares of Gilead are currently trading at $68.16 this morning, as of 10:39 a.m. While Smarter Analyst didn’t dive into the “whys” of Renaissance taking a bigger stake in Gilead, the publication said the fund follows a strict mathematical and statistical method of investment—a method others seek to follow.

It’s possible that Simons is anticipating Gilead will finally pull the trigger on an acquisition of another company as it looks to shore up revenue losses from its highly-successful HCV pipeline due to diminishing patient populations. Analysts and industry watchers have practically been begging Gilead leadership to do something to boost market valuation. Last week, Geoff Meacham, an analyst with Barclays, penned an open letter to Gilead calling on the company to take action. Meacham provided a five-step plan for Gilead leadership including transformational M&A deals; a consideration to cut costs in its HCV business if the market continues to decline; provide more clarity on the potential of its HIV pipeline; be more aggressive when it comes to licensing and business development deals; and finally, shift away from capital returns and reinvest in the business through M&A or other growth measures.

One potential deal for Gilead is an acquisition of Incyte. A deal for Incyte could provide Gilead with a way to strengthen its oncology portfolio behind Incyte ’s two lead products, Jakafi and Iclusig. Jakafi is expected to become a billion dollar drug by 2020. Merging with or acquiring Incyte would certainly provide Gilead’s oncology line with strong products. Currently Gilead only has one commercially available cancer drugs—Zydelig, for relapsed chronic lymphocytic leukemia (CLL), non-Hodgkin lymphoma (NHL), and relapsed small lymphocytic lymphoma (SLL). The company does have several oncology drugs in late-stage development.

Additionally, Incyte also has the rheumatoid arthritis drug baricitinib in its pipeline. The drug is under review by the U.S. Food and Drug Administration. Incyte is developing baricitinib with Eli Lilly . Incyte also has a development deal to develop epacadostat, oral selective IDO1 inhibitor, in combination with Merck’s Keytruda, an anti PD-1 therapy for four types of cancer. Epacadostat is also being evaluated with AstraZeneca ’s duralumab and Sanofi ’s Opdivo as potential cancer treatments. If Gilead were to acquire Incyte, the revenue potential from epacadostat would go a long way in off-setting declining sales of its blockbuster HCV drugs Harvoni and Sovaldi. Epacadostat has been called one of the “hottest assets” in oncology.

Some analysts have pushed for Gilead to acquire Tesaro and its cancer drug, niraparib. Still, other analysts suggest Gilead should look to Belgium-based Galapagos and its arthritis pipeline—a company Gilead already has a relationship with. Galapagos has one phase III trial, four phase II trials, three phase I trials, five preclinical trials and 20 discovery programs. Gilead already retains a 14.7 percent stake in Galapagos.

Currently the consensus rating for Gilead Stock on TipRanks is moderate buy with 13 buy and 6 hold rating, Smarter Analyst said.