Here Are the Biotechs on Gilead's Holiday Shopping List

Published: Nov 18, 2016

Here Are the Biotechs on Gilead's Holiday Shopping List November 17, 2016
By Mark Terry, Breaking News Staff

Gilead Sciences is struggling, although in a still-lucrative way. Even though its hepatitis C (HCV) franchise brought in $5.4 billion in the first half of the year, its stock price has lost more than 35 percent in value since June 2015. But its blockbuster Harvoni, had sales drop from $7.19 billion in the first half of 2015 to $5.58 billion in the first half of this year.

Although the company’s HIV portfolio is still strong, it hasn’t had much luck breaking into the oncology market. And yesterday, the company announced that two Phase III clinical trials of momelotinib, for patients in myelofibrosis, basically didn’t meet their top-line endpoint for either trial.

Analysts have been calling for Gilead to buy something—or be bought—for some time. And today both Keith Speights, writing for The Motley Fool, and Adam Feuerstein, writing for TheStreet, urge Gilead to consider buying one or all of the following four-plus companies.

1. Incyte Corporation

Feuerstein is aggressive about Incyte , noting that it would pick up Jakafi, a myelofibrosis drug that is more successful than Gilead’s own drug in that area. And it would also pick up an IDO inhibitor, which would “establish a toehold in cancer immunotherapy.”

He also says, “We’re also confident you can probably find a talented executive within the Incyte ranks to run your oncology business—a job that’s been unfilled since February!”

2. Tesaro

Both Feuerstein and Speights suggest Gilead acquire Tesaro . The company already has revenue flowing in from Varubi, which is used to treat delayed chemotherapy-induced nausea and vomiting (CINV). But the company’s pipeline is even more attractive.

“Tesaro,” Speights writes, “recently completed a rolling submission of a New Drug Application (NDA) for niraparib as a maintenance therapy for ovarian cancer based on positive results from a late-stage study. The poly (ADP-ribose) polymerase, or PARP, inhibitor is in another late-stage study for treating breast cancer.”

Feuerstein says, “Fine, then buy Tesaro for its PARP inhibitor. Yes, it is expensive but so is everything else. Suck it up.”

In addition to niraparib, Tesaro has an anti-PD1 monoclonal antibody, TSR-042, in an early stage trial, and an anti-TIM-3 monoclonal antibody, TSR-022.

3. Kite Pharma

Kite 's strengths are in oncology. Its lead pipeline product is chimeric antigen receptor (CAR) KTE-C19. The company expects to start a rolling submission to the U.S. Food and Drug Administration (FDA) for the accelerated approval to treat aggressive non-Hodgkin lymphoma before the end of this year, and possibly be approved in 2017.

It also has three other KTE-C19 clinical trials ongoing with data from the Phase II part of a Phase II/III trial in mantle cell lymphoma expected in 2017. It also has two early-stage trials in adult and pediatric acute lymphoblastic leukemia (ALL) and in diffuse large B-cell lymphoma. Kite also has three early-stage T-cell receptor programs.

4. Intercept Pharmaceuticals

Speights also proposes Intercept, if the company wants to move away from oncology or viruses. “Like Tesaro,” he writes, “Intercept already has a product on the market. Ocaliva won FDA approval in May for treatment of primary biliary cholangitis (PBC) in combination with ursodeoxycholic acid (UDCA). PBC is a chronic liver disease for which there is currently no cure.”

It also is investigating Ocaliva to treat nonalcoholic steatohepatitis (NASH), another chronic liver disease, with top-line results from a mid-stage trial expected in 2017. Since Gilead already has pipeline products for PBC and NASH, the question is, Why? Speights writes, “It might not seem to make sense that Gilead would consider buying Intercept because of this overlap. However, Gilead is behind Intercept in the race to claim a share in the potential $40 billion NASH market.”

5. Plus much, much more!

Feuerstein also throws out the possible acquisition of Juno Therapeutics , Vertex Pharmaceuticals , Alexion Pharmaceuticals and Regeneron Pharmaceuticals . He just wants Gilead to do something, anything.

“What we want, Gilead,” Feuerstein writes, “is for you to try. Just try. You’ve wowed us in the past with your M&A acumen, so let’s do it again. Buy a bunch of companies. Buy small. Some mid-sized. Buy revenue now. Reset the pipeline for revenue in the future. Be bold. Show us a path to new growth. Dare to fail. We know not everything will work out.”

And Speights, for his part, is also suggesting that bold action and ambition would be a good thing for Gilead to display. “Why settle for just one company when you can have them all?” he writes. “Gilead has nearly $32 billion on hand, counting cash, cash equivalents, and marketable securities. The combined market caps of Kite, Tesaro, and Intercept totals $12.3 billion. Even with a nice premium added to that amount, Gilead could afford to buy all three smaller biotechs and still have plenty of money left over.”

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