Gilead Sciences(NASDAQ:GILD) has wanted to be a leader in cancer treatment for awhile, and this week, it made a big splash into the indication when it announced the planned acquisition of Kite Pharma (NASDAQ:KITE), a company developing a new platform for cancer treatment called CAR-T.
In this clip from the Motley Fool’s Industry Focus: Healthcare podcast, analyst Michael Douglass is joined by Todd Campbell to discuss Gilead’s oncology merger and acquisition (M&A) strategy. Watch the video below to find out if these industry watchers give this deal a “thumbs up.”
A full transcript follows the video.
This video was recorded on Aug. 30, 2017.
Michael Douglass: Let’s turn back to Gilead’s overall M&A strategy. This is really the first big, splashy deal they’ve done since thePharmassetacquisition they did in 2011 — which was for a similar price point, by the way, it was $11 billion, and this deal is $11.9.
Todd Campbell:Yeah, they had good luck with it that time around. Maybe they were like, hey, $11 billion, that’s a good price, let’s buy that. What’s interesting, Michael, this is an even more advanced drug than that one, right?
Douglass:Yes, it’s completed phase 3, whereasSofosbuvir,which was the cornerstone molecule for hepatitis C that Gilead acquired when it bought Pharmasset, was only entering phase 3.
Campbell:Yeah. And Gilead has a history of always wanting to be the dominant player in a particular indication. They’ve done it in HIV, where they have 80% market share. They’ve done it in hepatitis C, where they have 90% market share thanks to that acquisition of Pharmasset back in 2011, or whenever the heck it was. Now, with Kite, they’re hoping again to have a platform that’s going to allow them to dominate in an indication, and boy is it a huge indication. Oncology drug sales exceeded $100 billion globally — $100 billion!
Douglass:Yeah. For for me, it’s not likely that Gilead is going to become the dominant cancer player, or anything like that. But, it’s very clear that Gilead thinks thatcellular therapy, this CAR-T that we’ve been talking about, is really one of the big futures, if not the big future, and that they view this platform just likeSofosbuvir was with Pharmasset and hepatitis C, their cornerstone for cancer. I’ll actually quote fromCEO John Milligan, who said in cancer, I quote, “Cellular therapy is going to be really the cornerstone of what we’re doing going forward.” And that’s interesting, because Gilead has been signaling for a while that they wanted to get involved in cancer. They’ve made some attempts at cancer drugs in the past, some of which haven’t panned out that well — Zydelig being the big example.
Campbell:I’ll go on record saying that was a flop. [laughs]
Campbell:$35 million in sales last quarter. $120 million, some companies would like that, but for Gilead, that’s a rounding error.
Douglass:Right, and that was their attempt to usher in a drug for chronic lymphocytic leukemia, and it just did not do well, and that was because of a nasty side-effect profile. So, this is really theiropportunity, hopefully, to build the cornerstone of a platform that can really help launch them in a big way into cancer.
Campbell:Michael, I suppose we should probably throw some caveats in here. We’reexcited about this deal because we know that Kite, being with both its CAR-T platform and it also has another platform that may allow it to target solid tumor cancers, which, wow, if you can develop a new platform for attacking a disease like non small-cell lung cancer, thenyou’re talking billions and billions of dollars of sales opportunity there. At the same time, cancer drug development is incredibly hard, and there’s significant risks. And we’ve seen already with JunoTherapeutics that these trials can get derailed quite quickly. We have patient deaths because of brain swelling in the Juno trials that caused it to get halted,and that still has the same target mechanism of action as Novartis’ and Kite’s drugs. You’vegot the risk of trial failure, you’ve got the risk of death as this rolls out to more patients, what side effects may pop up, we don’t know. Then, you’ve got the trials that are probably going on, will those succeed orend up getting sidelined? So, there are some risks, here. And hopefully, hopefully for patients and investors, five years from now, we’ll be looking back on this and saying, “Wow,what a phenomenal buy that was!”
Douglass:Sure. With that in mind, let’s talk about what we actually think of the deal here now. Basically, do we like it as Gilead shareholders? Are we pleased, are we thrilled, are we scared, is this terrible? I’ll go ahead and lead off because I’m posing the question, so it’s only fair that I should eat my own cooking, here. I like the deal. I like it a lot. I do think it’s a fairly expensive deal, butfrankly, every time Gilead has done an acquisition, someone, a lot of people, have ended up accusing them of overpaying. And yet, it never has, it seems, just about. So, I’m a big fan of this deal. I think this gives them the platform that they need to make that longer put into CAR-T. Thisisn’t about one drug. This is about a platform, this is about building a cornerstone set of therapies that can really enable them to carve out a big, dominant area in some of these really difficult-to-treat cancers. And, for me, I think it’s going to do great things for shareholders, and I think it’s going to do great things for the treatment of cancer. And, personally, that, for me, is the win-win.
Campbell:You know, Michael, I think a lot of the success or failure of this deal and whether or not I like it is going to be determined by how quickly do oncologists approach this for this tough-to-treat population? About 50% of Non-Hodgkin’s patients can be cured by existing therapies. You’re talking about a relatively small patient population out the gate of a few thousand people. A lot of it is going to [depend] on how it’s priced. Some people say this could cost, what, $600,000?
Douglass:Which is, the price thing is actually a little bit frustrating, because Novartis is supposed to announce prices later today for Kymriah,and we just don’t know right now at filming what they’re going to do. Will Gilead price a little bit below that, a little bit above that, the same? We don’t know, but that will at least give us a ballpark.
Campbell:Right, and how will payers view that, and when you go overseas, how will countries like England that NICE uses itsmetrics to try to figure out what the cost should be for medicines, how that will all shake out. There are some question marks, here, but overall, I think you summarized it very nicely. This gives them a platform that they can use to build an oncology franchise, and that’s way more important than going out and buying one single drug as one company. AndI think that’s very important. And, you know what, yeah, it was expensive at $11.9 billion, but it’s not like this is breaking the bank. Thecompany still has $24 billion, and cash grew by $2.5 billion last quarter alone. So, there’s plenty of money still kicking around to do other deals. So, I think this is a risky deal, but I think the reward justifies it, and I think it has a really good chance to be long-term positive for investors.
Douglass:The other thing that I’ll throw out there is, Gilead’s management has made clear thatthis isn’t necessarily their only deal in oncology, that they are willing to buy up additional drugs, potentially other companies, who knows. But, they’re willing to invest both in external M&A and also in internal R&D to make sure that they retain leadership in this area. Andif that means they have to buy other companies, they’ve signaled that they’re basically willing to do that, to make sure that Kite as Gilead retains its leadership in cancer. So, that’s a very good sign for future M&A forGilead shareholders. I think, as shareholders, we can be confident that a lot of that cash is going to get used in the future for maintaining that leadership. And in a lot of ways, that makes sense. More better treatments, new generations of drugs that can really help uncloak cancer and really strengthen the body’s defenses are a win-win, both for shareholders and humanity.
The rest is here:
Gilead Sciences’ Oncology M&A Strategy Explained – Motley Fool
- Report from Stat reveals the limits of IBM's Watson for Oncology. - Slate Magazine (blog) - September 7th, 2017
- Merck snaps up a German immuno-oncology upstart in a $603M bolt ... - Endpoints News - September 7th, 2017
- Startup that makes personalized cancer treatments gets $93 million in funding - SFGate - September 7th, 2017
- Moonlight Mixer to benefit oncology services - AdVantage News - September 7th, 2017
- Ramping back up on oncology, GSK takes an option on Adaptimmune's TCR cancer drug - Endpoints News - September 7th, 2017
- Advanced oncology treatment now available in Sterling - Journal Advocate - September 7th, 2017
- Ransomware Attack May Impact 19K Oncology Hematology Patients - HealthITSecurity.com - September 7th, 2017
- Zymeworks to Present at the European Society for Medical Oncology 2017 Congress and Hold Webcast to Review ... - Business Wire (press release) - September 6th, 2017
- OSE Immunotherapeutics Partners with Oncology Physician Network GERCOR to Conduct a Combination Phase 2 ... - Business Wire (press release) - September 6th, 2017
- MEI Pharma nabs rights to oncology candidate voruciclib - Seeking Alpha - September 5th, 2017
- EnGeneIC Announces Publication in The Lancet Oncology of First Clinical Study Employing EDV Nanocell Platform ... - Markets Insider - September 5th, 2017
- Performance by comedian David Lee Nelson raises money for oncology center - Do Savannah - September 5th, 2017
- Pembrolizumab Has Promising Activity in Extensive-Stage SCLC - Cancer Network - September 5th, 2017
- Endocyte Announces Presentation at the European Society for Medical Oncology (ESMO) - GlobeNewswire (press release) - September 5th, 2017
- 19000 Medical Oncology Hematology Consultants, PA records exposed in ransomware attack - SC Magazine - September 4th, 2017
- Belgian Biotech Grows its Immuno-Oncology Pipeline for Childhood Cancer - Labiotech.eu (blog) - September 4th, 2017
- Innovations in oncology explode as new treatments gain approval - Business Day (registration) - September 4th, 2017
- Cancer center takes in Houston patients statewide following Hurricane Harvey - KVUE - September 4th, 2017
- Oncology the current landscape and what it means for the future - pharmaphorum - September 4th, 2017
- To Fight Cancer, India Must Fast-Track Approvals For Oncology Drugs And Devices - Huffington Post India - September 4th, 2017
- Therapeutic Area: Oncology | Chiltern - September 3rd, 2017
- Best Oncology Conferences 2018 | Oncology Meetings USA ... - September 3rd, 2017
- Texas Oncology to cancer patients who have been displaced by ... - Star Local Media - September 3rd, 2017
- Oncurious to Buy VIB's Immun-Oncology Portfolio - BioPharm International - September 2nd, 2017
- Delaware oncology group hit by nearly month-long ransomware attack - Healthcare IT News - September 2nd, 2017
- For residents, by residents: Mentorship program focuses on radiation oncology - Radiology Business - September 2nd, 2017
- Performance of AstraZeneca's Oncology Segment in 2Q17 - Market Realist - September 2nd, 2017
- Shattuck-Takeda Partnership Will Involve Double-barreled Cancer-fighting Therapies - Immuno-Oncology News - September 2nd, 2017
- Guenther Koehne named chief of bone marrow transplantation and hematologic oncology at Miami Cancer Institute - The Cancer Letter Publications - September 2nd, 2017
- Pharmalittle: A generic rival for opioid treatment & an oncology setback for J&J - STAT - September 2nd, 2017
- BeiGene Announces Presentations at the European Society for Medical Oncology 2017 Congress - GlobeNewswire (press release) - August 31st, 2017
- Loxo Oncology to Present at Upcoming Investor Conferences - GlobeNewswire (press release) - August 31st, 2017
- 6 years after child's death, father buys lunch for oncology unit nurses - WKRN.com - August 31st, 2017
- Pediatric oncology nurses embrace a unique role - Atlanta Journal Constitution - August 31st, 2017
- AVEO Oncology: EU Approval Pop Is Just The Beginning - Seeking Alpha - August 31st, 2017
- BizVibe Announces Its List of the Best Oncology Pharmaceutical Companies for 2017 - Business Wire (press release) - August 31st, 2017
- ZIOPHARM Oncology Inc (ZIOP) Shares Needle Moving -2.94% - Morgan Research - August 31st, 2017
- Star team quietly raises $21M to launch the latest immuno-oncology ... - Endpoints News - August 31st, 2017
- Texas Oncology Available To Patients Impacted By Harvey - PR Newswire (press release) - August 30th, 2017
- Dell Medical School creates Department of Oncology - UT The Daily Texan - August 30th, 2017
- Six years after child's death, father buys lunch for oncology unit ... - NBC4i.com - August 30th, 2017
- Jazz, ImmunoGen partner on hematology, oncology drug development - BioPharma Dive - August 30th, 2017
- Five Prime cuts loose from InhibRx immuno-oncology deal - FierceBiotech - August 29th, 2017
- Bivarus and Community Oncology Alliance Collaborate to Improve ... - Business Wire (press release) - August 29th, 2017
- Kura Oncology to Participate in Citi's 12th Annual Biotech Conference - GlobeNewswire (press release) - August 29th, 2017
- Exceptional Registered Nurse and Radio Oncology Nurse, Jose Vicente Delgado, RN, BSN, will be Highlighted in the ... - PR NewsChannel (press release) - August 29th, 2017
- Unusual Activity Spotted in ZIOPHARM Oncology Inc (ZIOP) and Telecom Argentina SA (TEO) - Morgan Research - August 29th, 2017
- Oncology training for community nurses begin in Kumasi - Ghana News Agency - August 29th, 2017
- AVEO Oncology (AVEO) Granted European Union Approval for FOTIVDA (tivozanib) - StreetInsider.com - August 28th, 2017
- Ridley-Tree Cancer Center of Santa Barbara achieves four-year accreditation for radiation oncology services from ... - Markets Insider - August 28th, 2017
- Immuno-Oncology 360 Summit Confirms Program Line-up for February 7-9, 2018 - Benzinga - August 28th, 2017
- Options Traders Expect Huge Moves in ZIOPHARM Oncology (ZIOP) Stock August 28, 2017 - Zacks.com - August 28th, 2017
- Park Ridge news briefs: Oncologist, molecular biologist named to Maine South's alumni Wall of Honor - Chicago Tribune - August 28th, 2017
- 'Bras for a Cause' to benefit oncology patients - Sandusky Register - August 27th, 2017
- Oncology | Internal Medicine | ACP - August 26th, 2017
- Maury Regional adds five physicians - Columbia Daily Herald - August 26th, 2017
- Friday, August 25, 2017 - LWW Journals (blog) - August 26th, 2017
- Who Is Cancer Genetics? - Modest Money (press release) (blog) - August 25th, 2017
- Oncology probe was blocked - Independent Online - August 25th, 2017
- Samaritan awarded radiation oncology qualification for new cancer treatment option - WatertownDailyTimes.com - August 25th, 2017
- Champions Oncology Announces Strategic Collaboration with AstraZeneca to Develop Unique Cohorts of Patient ... - PR Newswire (press release) - August 25th, 2017
- Highlighting the hematology/oncology unit at Gundersen - News8000.com - WKBT - August 25th, 2017
- FDA Actions & Updates - LWW Journals (blog) - August 24th, 2017
- Equicare Health and Lexington Medical Center collaborate on oncology integration project - Markets Insider - August 24th, 2017
- A Look into Merck's Immunology and Oncology Portfolio - Market Realist - August 24th, 2017
- Hematologist Oncologist Now Serving Mid-Shore Cancer Patients - My Eastern Shore - August 24th, 2017
- Grid Therapeutics Signs Exclusive License Agreement to Develop a Novel Immuno-Oncology Antibody - Business Wire (press release) - August 22nd, 2017
- LabCorp Partners OmniSeq to Grow in Immuno-Oncology Space ... - Nasdaq - August 22nd, 2017
- BTG and SIO Expand Immuno-Oncology / Interventional Oncology Grant Programme - Markets Insider - August 21st, 2017
- Champions Oncology Announces Strategic Collaboration with AstraZeneca to Develop Unique Cohorts of Patient ... - Markets Insider - August 21st, 2017
- ZIOPHARM Oncology Inc (ZIOP) Share Performance Recap - FLBC News - August 19th, 2017
- Champions Oncology Announces Research Collaboration with The Addario Lung Cancer Medical Institute to Develop ... - Markets Insider - August 19th, 2017
- Teton Valley Hospital to provide oncology services - KIFI - LocalNews8.com - August 19th, 2017
- Is ZIOPHARM Oncology Inc (ZIOP) Building Momentum? - FLBC News - August 19th, 2017
- Can Stress Cause Cancer? | Massage Professionals Update - August 18th, 2017
- Champions Oncology (CSBR) Announces Research Pact with The Addario Lung Cancer Medical Institute - StreetInsider.com - August 18th, 2017
- Buy or Sell? Average Brokerage Ratings on Vantiv, Inc. (VNTV), Clovis Oncology, Inc. (CLVS) - StockNewsJournal - August 18th, 2017
- Bristol-Myers shares sink after another setback for its immuno-oncology franchise drugs - Endpoints News - August 18th, 2017
- Cell Line Development Services Markets, 2025 - Growing Incidence Rates of Oncology and Immunological Disorders ... - GlobeNewswire (press release) - August 18th, 2017
- Advanced oncology treatment now available in Sterling - Fort Morgan Times - August 17th, 2017