Web Date: August 28, 2017
Gilead to acquire Kite Pharma for $11.9 billion
In a bid to diversify its portfolio and boost growth, Gilead Sciences has agreed to acquire Kite Pharma, a Santa Monica, Calif.-based immunotherapy specialist focused on cancer, for $11.9 billion. Gilead, which focuses on treatments for infectious disease, is following up its $11 billion acquisition of Pharmasset in 2011, a deal that landed the Foster City, Calif.-based firm the hepatitis C drugs Sovaldi and Harvoni.
Kite is a leader in the emerging field of cell therapy in which a patient’s immune cells are activated to fight cancer. The firm has developed engineered cell therapies that express either a chimeric antigen receptor or an engineered T-cell receptor depending on the type of cancer. Its premier therapy, axicabtagene ciloleucel (axi-cel), is a chimeric antigen receptor T-cell (CART) therapy currently under priority review by the U.S. Food and Drug Administration.
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Axi-cel is expected to be the first treatment approved for refractory aggressive non-Hodgkin’s lymphoma, which includes diffuse large B-cell lymphoma, transformed follicular lymphoma, and primary mediastinal B-cell lymphoma.
“The acquisition of Kite establishes Gilead as a leader in cellular therapy and provides a foundation from which to drive continued innovation for people with advanced cancers,” said John F. Milligan, Gilead’s president and chief executive officer.
Gilead, which established itself selling HIV/AIDS therapies, doubled its sales in 2014 with the approval of Sovaldi, followed by Harvoni, a combination therapy based on Sovaldi. Sales for those drugs are trending downward, however, dropping to $2.9 billion in the second quarter of 2017 from $4 billion in the same period last year. Meanwhile, the company has been widely criticized for the prices it set for the drugs, $80,000 for a course of treatment for Sovaldi and $94,500 for Harvoni, which limited access through insurers.
Under pressure from Wall Street to boost revenue, Gilead management indicated that it is interested in acquiring a presence in oncology, with an eye toward cell therapy. It may have signaled a new direction earlier this year when it hired Alessandro Riva, then an oncologist at Novartis, to head its hematology and oncology therapies division.
In a note to investors, the investment bank Leerink indicated that the Kite acquisition does not come as a surprise but noted that Gilead has an ambitious revenue goal in the deal, seeming to target $2 billion to $3 billion in annual sales from Kite’s platform based on its paying a 30% premium over Kite’s stock price. The size of the transaction indicates the firm will not make further investments in CART platforms such as Juno and Cellectis, though Gilead may seek to acquire other cancer treatment platforms, according to Leerink.
Industry watchers note that the complexity of manufacturing an individual cell therapy treatment poses a challenge for Gilead as it enters the area. “Kite’s technology has a lot of potential, but Gilead will need to work hard to retain Kite’s scientists”, says John Lamattina, nonexecutive director at PureTech Ventures and former head of research at Pfizer. "Given all the competition in the CART field, it is likely that many of the Kite scientists will very poachable.” Retaining the Kite team will be a key priority for Riva, says LaMattina.
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