How Gilead’s Newest Takeover Deal Will Bolster Its Cancer Strategy

Mar 4, 2020 | Acquisition, Gilead, Investor Watch, M&A, News, Oncology, Pipeline, Popular Posts

How Gilead's Newest Takeover Deal Will Bolster Its Cancer Strategy

Gilead Sciences (GILD) will buy cancer-focused player Forty Seven (FTSV) for $4.9 billion, the biotech company said Monday, sending FTSV stock rocketing. The deal was rumored last week and allows Gilead to harness Forty Seven’s cancer drug, magrolimab. Magrolimab belongs to a class of immuno-oncology drugs, which help the immune system find and fight cancer cells.

Buying Forty Seven helps Gilead build out its pipeline in oncology, the biotech company said in a news release. In 2017, Gilead paid $11.9 billion to buy Kite Pharma. At the time, Kite was nearing Food and Drug Administration approval for a cancer drug, Yescarta.

“Magrolimab complements our existing work in hematology, adding a non-cell therapy program that complements Kite’s pipeline of cell therapies for hematological cancers,” Gilead Chief Executive Daniel O’Day said in a written statement.

FTSV Stock Flies On Takeover Deal

On the stock market today, FTSV stock soared 61.9%, to 93.91. Gilead stock popped 8.7%, to 75.40.

Under the terms of the deal, Gilead will pay $95.50 in cash per share of FTSV stock. Both boards of directors have already approved the acquisition, which is expected to close in the second quarter, Gilead said in a news release.

Gilead is hoping to grow its pipeline. Hepatitis C drug sales have declined for years. The biotech company’s biggest assets are currently in HIV treatments. And last year, Kite’s Yescarta generated $456 million in sales, growing nearly 73%.

“This transaction supports Gilead’s strategic focus in growing its pipeline and expertise in immuno-oncology beyond cell therapy, as we seek to deliver our ambitious goal of bringing 10 transformative therapies to patients in the next 10 years,” Gilead said in an email to Investor’s Business Daily.

Biotech Company Targets A Key Protein

Forty Seven’s magrolimab targets a protein called CD47. The biotech company describes CD47 as a “do not eat me” signal. Cancer cells disguise themselves in that protein in order to avoid detection from the immune system. Magrolimab helps the immune system “see” those camouflaged cells.

The biotech company’s most advanced tests are in blood cancers called myelodysplastic syndromes and acute myeloid leukemia. Additional studies are ongoing in Non-Hodgkin lymphoma, another blood cancer, and in solid tumors including ovarian and colon cancers.

Chief Executive Mark McCamish says Forty Seven unveiled promising data for magrolimab in MDS patients in December. At the time, the biotech company knew it had the funds to file for approval in late 2021. But to maximize the potential of magrolimab would require expanding to more patients.

“For that reason, we started to talk about co-development, partnerships and licensing activities in a way we could enhance our ability,” he told IBD in an interview. “It wasn’t our goal to be acquired. It was simply our goal to maximize the potential for patients and that’s what started the process.”

Gilead’s New Pattern Of Deals

Magrolimab’s ability to target MDS, drove the deal, Mizuho Securities analyst Salim Syed said in a note. With the potential for accelerated approval, magrolimab could gain Food and Drug Administration approval in 2022, he said.

“Gilead noted on today’s call that it believes the Street is under-modeling the magrolimab (first treatment) MDS opportunity,” he said. A survey from Mizuho pegged the opportunity at $1 billion in peak sales.

Importantly, the deal marks CEO O’Day’s second key transaction since taking Gilead’s reins a year ago, Syed said. In the first, the biotech company deepened a partnership with Galapagos (GLPS). Both deals were in the $4 billion to $5 billion range, he said.

“Gilead is willing to allocate capital to medium-sized deals (rather than large-scale transactions which management noted today have a high bar), and do it at a quicker pace than Gilead has historically done M&A (mergers and acquisitions), both positives in our view,” Syed said.

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