January 30, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Investors have been urging Gilead Sciences to acquire a company for some time now. And earlier this month, when the company announced that Alessandro Riva would head up its hematology and oncology division, the speculation gained steam.
Johnson & Johnson ’s recent $30 billion acquisition of Swiss-based Actelion has also fueled speculation that 2017 is going to be a big year for acquisitions. Bret Jensen, writing for Seeking Alpha, discusses two potential acquisition targets for Gilead.
This would be a top pick if Gilead wanted to expand in oncology. Gilead had indicated it wants to stick to smaller deals in the $1 billion to $5 billion range, and an Exelixis buy would be higher than that, since it already has a $5 billion market cap without any kind of premium. Takeda Pharmaceutical recently acquired Ariad Pharmaceuticals for $5.2 billion, which was about a 74 percent premium.
Exelixis’ Cabometyx was approved by the U.S. Food and Drug Administration (FDA) for advanced renal cell carcinoma that was previously treated with anti-angiogenic therapy. Launched in the second quarter of 2016, it’s already picked up about a third of the market for that indication, and most analysts think it will receive label expansion approval.
Exelixis is currently trading for $18.14.
Jensen writes, “At $18 a share, Exelixis certainly is not as cheap when I was buying it at just over $4.50 a share for the Growth Stock Advisor portfolio last May, but still could be a logical fit for Gilead. At this point, Gilead’s shareholders might forgive it for overpaying a bit to make an acquisition and change the narrative and sentiment on its beaten down stock.”
This France-based company focuses on metabolic and inflammatory diseases, particularly on liver and gastroenterology. In particular, the company’s Elafibranor is being developed for nonalcoholic steatohepatitis (NASH). There are no drugs for NASH, and treatment is typically lifestyle oriented—low-fat diet, weight loss, exercise, stop drinking alcohol.
In a Phase II trial, Elafibranor was safe with a good tolerability profile, and also showed cardio-protective benefits. It is currently in a Phase III RESOLVE-IT clinical trial. In February 2014, the FDA gave it Fast Track designation in NASH. A 72-week interim analysis is expected this summer.
Genfit SA is currently trading for 21.36 euros.
It’s a pretty inexpensive company, with a market cap of about $750 million. Jensen writes, “Obviously, betting on elafibranor is a riskier proposition than on Cabometyx as it has not been approved. However, given the huge potential market for NASH treatments, I believe it is a risk Gilead should take.”
Gilead had more than $20 billion in fresh cash flow in the last five quarters, so being able to afford these deals isn’t a problem. But investors and analysts have been throwing out potential acquisition targets for Gilead for some time, and the company so far has stayed out of the market. Other companies proposed include Puma Biotechnology , Incyte Corporation , Kite Pharma and Portola Pharmaceutical . Puma is an oncology company, as is Incyte. Kite is a leader in CAR-T immuno-oncology. And Portola has a pair of drugs for Factor Xa, falling into the thrombosis and hematologic disorders market.
