September 21, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Investors really, really want Gilead Sciences to buy something. That push has been ongoing for at least 18 months. Its shares are down about 23 percent so far this year. But it has an impressive portfolio and annual sales of more than $30 billion. In particular, its HIV and AIDS portfolio is strong and expected to get stronger. It’s a dominant player in HCV although its margins are shrinking there because of competition.
Gilead was one of the companies in on the auction for Medivation , which was won by Pfizer . Ken Kam, writing for Forbes, talks to Todd Hagopian, who launches his biotech fund at Marketocracy in March 2011, about what’s going on with Gilead.
Hagopian, for his part, thinks Gilead is ready to buy. “Gilead is in the news this week, after issuing $5 billion in debt, despite having over $24 billion in cash already. Jeffries analysts have pointed to this development as an obvious sign that a major acquisition, or several small acquisitions are on the way.”
He thinks if Gilead is in the market, it will focus on parts of the biotech market where it can dominate while maintaining a first-mover advantage. So first, he thinks the oncology market is a possibility with Puma Biotechnology . Puma currently has two drugs in Stage III trials, and seven drugs in Stage II trials, all for various types of breast cancer. Hagopian writes, “Puma has had trouble taking drugs to market efficiently, falling behind in its drug submittals. Gilead would be able to drive these new drugs to the market, and dominate a new field, building another ATM business model in the breast cancer segment.”
Another possibility is Incyte Corporation . Incyte has also been suggested as an acquisition target for Amgen and Shire . Incyte’s market value is about $13 billion. Its only approved drug is Jakafi, which accounts for about 70 percent of company revenue, but is expected to hit blockbuster status by 2020. It also has nine cancer drugs in its pipeline, three of which are JAK inhibitors.
Hagopian also suggests Kite Pharma . It’s the leader in CAR-T immune-oncology so far, and after Juno had problems, Kite and bluebird bio are the lead contenders. Hagopian said, “I believe that the CAR-T market is going to be huge in the future, and Kite will be the first-mover in the segment. If Gilead is looking to grab a large piece of the CAR-T pie, they will look to acquire Kite by the end of the year. This stock will likely go for twice what it is worth at the moment.”
Outside the oncology market, Hagopian offers up Portola Pharmaceutical as a possible acquisition target for Gilead. The stock is down because of a failed clinical trial in the third quarter, but it has three drugs on the market. “Portola has a pair of Factor Xa drugs, which are extremely novel,” Hagopian says. “There are almost no competitors on the horizon, and the government has decided that these drugs are important. The company is not quite ready for primetime, and has suffered some setbacks through the approved expedited process.”
Which all leads, for Portola, why it would benefit from a larger company like Gilead, which has experience and expertise in successfully bringing drugs to market.
