December 8, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Analysts are once again speculating on who Gilead Sciences, Inc. might acquire. This was spurred on by a recent article published by The Financial Times where company executives discussed an acquisition.
Gilead is currently dominating the hepatitis C market with Sovaldi and Harvoni. These are enormously expensive drugs, costing about $1,000 per pill, and analysts believe sales are leveling off. The two drugs to date have raked in about $27 billion.
There are several factors involved in flattening sales. First, the company—and most drug companies—are facing some pushback by regulators, insurers and the public over drug pricing in the wake of Turing Pharmaceutical’s Martin Skreli goading people over raising the price of the drug Daraprim by 5,000 percent.
This has put some focus on Gilead’s HCV pricing. Recently two U.S. Senators, Ronald Wyden (D) from Oregon and Chuck Grassley (R) from Iowa, argued that Medicare spent over $8 billion on Sovaldi and Harvoni before rebates. Seeking Alpha notes that, “I envision a scenario where these entities and/or the government negotiate steeper discounts on HCV drugs from Gilead going forward.”
Another factor is the drugs’ effectiveness. They don’t just treat hepatitis C, they virtually cure it. Which means that the pool of patients needing the drug grows smaller and the market diminishes.
And finally, there’s competition. Merck & Co. will be launching its own HCV drug next year and is expected to have a much lower price tag. Gilead and Chicago’s AbbVie Inc. got into a pricing war over Harvoni, Sovaldi and AbbVie’s Viekira Pak, with the country’s biggest pharmacy benefits manager, Express Scripts Inc., demanding big discounts from Gilead by picking Viekira Pak in its formulary over Harvoni.
All of these pressures give Gilead incentive—along with a lot of cash—to look at strategic acquisitions. Potential targets include Arrowhead Research Corporation and Achillion Pharmaceuticals, Inc. . Arrowhead has an hepatitis B drug in a mid-stage pipeline, ARC-520. Positive results were released yesterday, the company’s chief executive officer Christopher Anzalone saying in an statement, “During the ongoing Phase IIb clinical trials, we are studying ARC-520 as monotherapy as well as in combination with other agents with the goal of identifying a regimen that leads to consistent functional curves.”
Achillion, a much bigger company than Arrowhead, focuses on infectious diseases and immune disorders. Its NS5A inhibitor, ACH-3102, when combined with Sovaldi, has shown 100 percent cure rates in treatment-naïve hepatitis C patients within six to eight weeks of treatment. Achillion has a partnership with Johnson & Johnson in HCV research, making the two companies Gilead’s competitors. An acquisition of Achillion might take that off the table.
Writing for BidnessEtc., Hannah Ishmael points out that Gilead has spread out into cancer research recently, so acquisitions in that market would make sense as well. She cites Kite Pharma, Inc. , Clovis Oncology , and Incyte Corporation as potential targets.
Kite, worth $3.1 billion, has KTE-C19, a CAR-based immuno-oncology drug that is currently in trials for non-Hodgkin’s lymphoma and mantle-cell lymphoma. Clovis, worth about $1.3 billion has two potential blockbuster drugs, Rociletinib for lung cancer and Rucaparib for ovarian cancer. It also has Lucatinib in mid-stage clinical trials for breast and lung cancers. However, in November the U.S. Food and Drug Administration (FDA) delayed approval of Rociletinib, which caused the stock to drop by more than 70 percent.
Incyte is a much larger company, with about $20 billion. It has Jakafi already on the market which is expected to be a blockbuster by 2020. It also has nine cancer drugs in its pipeline, three of which are JAK inhibitors. An acquisition there would give Shire a lot to work with in expanding its oncology pipeline.
“People ask, ‘What are you going to do with all your money?’” Norbert Bischofberger, executive vice president of research and development for Gilead told The Financial Times. “Well, we have our eye on the external world—we have incredible cash flows and we are looking for opportunities.”
He notes that, of course, they are looking at hepatitis and cancer companies, but, “In the end, we wouldn’t be opposed to making an investment in something completely different.”
