• SKIP TO CONTENT
  • SKIP NAVIGATION
  • Patient Resources
    • COVID-19 Patient Resource Center
    • Clinical Trial Listings
    • What is Clinical Research?
    • Volunteering for a Clinical Trial
    • Understanding Informed Consent
    • Useful Resources
    • FDA Approved Drugs
  • Professional Resources
    • Research Center Profiles
    • Market Research
    • FDA Approved Drugs
    • Training Guides
    • Books
    • eLearning
    • Events
    • Newsletters
    • White Papers
    • SOPs
    • eCFR and Guidances
  • White Papers
  • Clinical Trial Listings
  • Advertise
  • COVID-19
  • Sign In
  • Create Account
  • Sign Out
  • My Account
Home » Gilead’s $12 billion acquisition of Kite ignites speculation about an M&A boom in biotech

Gilead’s $12 billion acquisition of Kite ignites speculation about an M&A boom in biotech

September 11, 2017
CenterWatch Staff

The recent $11.9 billion acquisition of Kite Pharma by Gilead has turned up the temperature in the 2017 M&A landscape, transforming a lackluster market into one now brimming with potential as big pharma perks up and takes notice of smaller biotechs with de-risked candidates.

The only other mega-deal this year has been Johnson and Johnson’s acquisition of Swiss biotech Actelion for $30 billion—the pharma giant’s biggest deal ever, which was announced in January. Yet the two deals are fundamentally different, with Gilead’s viewed as a potential market catalyst while Johnson and Johnson’s was not.

While Actelion’s products generally fall in-line with Johnson and Johnson’s existing portfolio, Gilead’s acquisition of Kite, one of key players in the red-hot immuno- oncology cell therapy field, represents a distinct broadening of its portfolio, which is currently focused on its HIV and hepatitis C products.

According to a Gilead spokesperson, “This transaction makes Gilead a leader in the field of cellular therapy for oncology.” Investors reacted favorably to the deal, with Gilead’s stock spiking nearly 2% after the deal was announced.

Broadly, the deal may unleash more aggressive dealmaking in the second half of 2017. By pharma standards, 2017 has been a slow year in terms of M&A activity, with a total value of $33.2 billion and 43 transactions—an increase in value but with six fewer deals compared to the same period last year.

For months, analysts have blamed a variety of factors on the sluggishness, including a wait-and-see approach regarding policy changes under the new, Republican-controlled administration.

“A lot of people were holding their breath to see what policies would be changed, such as tax reform,” said Dr. Maria Fardis, Ph.D., MBA, chief executive officer of Iovance Biotherapeutics, a cell therapy company. “But in the end, not much has happened in a way that impacted biotech or M&A.”

It’s possible that Gilead’s acquisition will “open the floodgates,” Fardis said. “It takes the nerves away to see a company go out and spend $12 million.” Many analysts have pointed to the deal as a sign of things to come, with J.P. Morgan analyst Cory Kasimov telling reporters that the “long awaited M&A has finally arrived.” 

However, Les Funtleyder, Healthcare Portfolio Manager at E Squared Asset Management, sees the market trends differently. “What Wall Street gets wrong [in pharma] is thinking that one deal begets another—it isn’t so,” said Funtleyder.

“The significance of this deal is that everybody was waiting for a deal from Gilead because they have so much cash and a declining core franchise,” Funtleyder said. “Kite was a little bit unexpected in a sense that many people thought that Gilead would go for an orphan drug company, or company like Vertex or Incyte.”

“Any M&A is always data driven,” said Fardis. “[Gilead] paid a significant amount of money, but it was also a very de-risked asset.” 

Broadly, valuations of smaller biotech companies are “a little on the high side, so that’s one thing that will put companies off,” said Funtleyder. “The second thing is that the deal has to make strategic sense, and a lot of [large pharmas] are in relatively good shape.”

“If I was sitting on a pile of cash, I wouldn’t necessarily jump in just because someone else spent their money,” said Fardis. While she believes the Gilead deal will ignite M&A in the second half of 2017, the activity “will still be data driven.”

For Funtleyder, this means that the market is likely to see smaller acquisition and licensing deals, such as Merck’s strategy of small acquisitions to build around existing heavyweights like its cancer drug Keytruda.

Outside of immuno-oncology, indications that could see deals this year include orphan disease and aesthetics. “The ideal acquisition candidate is a company with a couple of products on the market and a few in the pipeline ... where the only gating factor to success is capital,” said Funtleyder. “The problem for potential acquirers is that the capital markets windows have been wide open, so any [small biotech] that wants to do a public offering can.”

Even if Gilead’s move does not of ignite an industry-wide flurry, the deal has helped legitimized the still-nascent field of cell-based immuno oncology.

“It may make companies look a little bit harder at CAR-T and related fields, such as cellular editing,” said Funtleyder.

“In general biotech was in a pause and halt mode,” said Fardis. The Gilead deal shows that cell therapies are not “just cool science experiments. They are here to stay, and the Novartis approval further emphasizes that message.” Other players in the space include Bluebird Bio and Juno Therapeutics, which is rumored to be an acquisition target for Celgene.

“In a way,” Fardis said, “the [CAR-T] space is mimicking the BTK inhibitor space a couple of years ago in that the transactions are very data driven and very opportunistic.”

Fardis, who worked at Gilead for a decade and still owns stock, said she was pleased to see the deal. “I was pleased as a shareholder, and I was pleased that the company decided to spend the cash they have to bring drugs to market.”

“As a drug developer,” she added, “what I see is that they ignited M&A activity, which was in a bit of a watchful mode.”

 

This article was reprinted from Volume 21, Issue 36, of CWWeekly, a leading clinical research industry newsletter providing expanded analysis on breaking news, study leads, trial results and more. Subscribe »

Upcoming Events

  • 25Apr

    Effective Root Cause Analysis and CAPA Investigations for Drugs, Devices and Clinical Trials

  • 26Apr

    FDA’s New Laws and Regulations: What Drug and Biologics Manufacturers Need to Know

  • 27Apr

    Califf’s FDA, 2023 and Beyond: Key Developments, Insights and Analysis

  • 17May

    2023 WCG Avoca Quality Consortium Summit

  • 21May

    WCG MAGI Clinical Research Conference – 2023 East

Featured Products

  • Spreadsheet Validation: Tools and Techniques to Make Data in Excel Compliant

    Spreadsheet Validation: Tools and Techniques to Make Data in Excel Compliant

  • Surviving an FDA GCP Inspection

    Surviving an FDA GCP Inspection: Resources for Investigators, Sponsors, CROs and IRBs

Featured Stories

  • tablet

    Digital Intake Platforms Effective as Source of Trial Information, Survey Shows

  • Diversity-360x240.png

    Site Spotlight: EmVenio Research Takes to the Road to Promote Trial Diversity

  • Five Ws

    Consider the Five ‘W’s to Understand Potential Participants

  • QandA-360x240.png

    Perspectives from Smaller-Sized CROs: Q&A with Cheryle Evans

Standard Operating Procedures for Risk-Based Monitoring of Clinical Trials

The information you need to adapt your monitoring plan to changing times.

Learn More Here
  • About Us
  • Contact Us
  • Privacy Policy
  • Do Not Sell or Share My Data

Footer Logo

300 N. Washington St., Suite 200, Falls Church, VA 22046, USA

Phone 617.948.5100 – Toll free 866.219.3440

Copyright © 2023. All Rights Reserved. Design, CMS, Hosting & Web Development :: ePublishing