March 14, 2017
By Alex Keown, BioSpace.com Breaking News Staff
FOSTER City, Calif. – As rumors abound that Gilead Sciences and Incyte are closer to a possible deal, Merrill Lynch diagramed what a merger between the two companies might look like and how it could be financed.
A merger between the two companies would allow Gilead, a leader in the declining hepatitis C market, 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 drug--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.
In its analysis, Merrill Lynch said Incyte would be a strategic fit for Gilead based on its current drugs, as well as other therapies in its pipeline, including baricitinib, which is under review by the U.S. Food and Drug Administration (FDA) for rheumatoid arthritis. 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.
If Gilead pulls the trigger on an Incyte deal, which could be for about $19 billion, Merrill Lynch said the company could finance the deal with an all cash acquisition by borrowing. Gilead has about $32 billion in cash, but the bulk of those funds are held outside the United States. The company also has about $26 billion in debt, Merrill Lynch said. While some analysts are high on a possible deal between Incyte and Gilead, the real question is will a deal be struck? Or, will Gilead look elsewhere?
Merrill Lynch has reiterated a Neutral rating for Gilead with a $76 price target. Shares of Gilead are currently trading at $67.79, as of 10:39 a.m. Shares of Incyte are trading at $151.07 this morning.
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.
