- Gilead on Sunday reached a deal to buy Immunomedics for approximately $21 billion, agreeing to pay more than double the New Jersey drugmaker's market value to gain access to its recently approved breast cancer medicine.
- The acquisition, which would rank as the biotech industry's largest this year, is the latest sign of Gilead's intent under CEO Daniel O'Day to accelerate a long-running push to become a player in the lucrative market for cancer drugs.
- Discussions between the two companies began in April, just before Immunomedics won an accelerated clearance from the Food and Drug Administration for Trodelvy, a treatment for an aggressive form of breast cancer and the company's first approved drug. Gilead expects Trodelvy could work in other types of breast cancer, as well as in tumors of the bladder and lung.
Gilead, best known for its HIV and hepatitis C treatments, has spent years trying to build an oncology business, with mixed results. Three years ago, the biotech bet big on cancer cell therapy with a near-$12 billion deal for Kite Pharma, but sales of Kite's principal drug remain modest.
Under O'Day, who joined Gilead from Roche in late 2018, the company has significantly stepped up its efforts to expand in oncology. Since March, when Gilead bought biotech Forty Seven and its experimental treatment for leukemia and lymphoma, the company has inked a series of eight research partnerships with smaller cancer companies.
The flurry of dealmaking has significantly expanded Gilead's pipeline of experimental cancer drugs and, by buying Immunomedics, the company adds an already on the market therapy in Trodelvy. Notably, the acquisition gives Gilead an entry point into research on treatments for solid tumors, as its investments to date have come in blood cancers.
"We are fast-forwarding our plans to build a substantial oncology business with significant potential," said O'Day on a Sunday conference call with analysts and investors.
The deal will cost Gilead, however, and could bring criticism from investors that the biotech overspent. At a proposed buyout price of $88 per Immunomedics share, Gilead will pay an 108% premium over the stock's closing price on Friday.
Investors had similar complaints with the buyout of Kite, although the price for Immunomedics was likely driven higher by competition from other potential partners. Gilead executives told Wall Street analysts at least four other major drugmakers were interested in Immunomedics and Trodelvy.
If the deal closes as expected later this year, Gilead will have invested just over $27 billion upfront in cancer companies this year, a significant sum even considering the cash reserves Gilead has to deploy.
Gilead will fund the acquisition with roughly $15 billion of the $21 billion in cash it had on hand at the end of June, as well as $6 billion in newly issued debt.
The deal could limit the company's ability to pursue other high-dollar deals, although Andrew Dickinson, Gilead's chief financial officer, said Sunday it could still consider deals similar to the $5 billion acquisition of Forty Seven.
"You don't do a $21 billion deal every year," he said on the conference call.
Sales of Trodelvy have not amounted to much since the drug was launched two months ago, but Gilead expects significant growth, forecasting the acquisition will add significantly to its profits beginning in 2024.
Talks with Immunomedics about a potential deal began six months or so ago, according to O'Day, and Gilead's confidence grew after a study of Trodelvy was stopped early in April due to signs breast cancer patients were benefiting greatly from treatment.
The trial, called ASCENT, tested Trodelvy in patients with metastatic triple-negative breast cancer, an aggressive form of the disease that's unresponsive to standard hormone and targeted drugs. The results, which will be presented next weekend at the European Society for Medical Oncology's virtual congress, should serve as confirmation of the accelerated approval granted by the FDA in April.
Immunomedics has studied Trodelvy in other types of previously treated breast cancer, as well as in bladder and lung cancer.
Trodelvy is an antibody-drug conjugate, a type of treatment that pairs a toxic compound with a special protein designed to target tumor cells. In Trodelvy's case, that protein seeks out a receptor called Trop-2, which helps tumors grow, divide and spread.
Other companies, including AstraZeneca and Seattle Genetics, are exploring antibody-drug conjugates in cancer types targeted by Immunomedics. AstraZeneca's, which it licensed from Daiichi Sankyo, works similarly to Trodelvy and is viewed by analysts as the drug's principal rival.
Merdad Parsey, Gilead's chief scientific officer, acknowledged the potential for competition on Sunday's call, but claimed Trodelvy's safety profile would make it a compelling choice.
For Immunomedics, the deal completes a remarkable turnaround from four years ago, when the company was worth just a few hundred million dollars. Investors' patience was further tested in early 2019, when the FDA rejected Immunomedics' first attempt to win approval for Trodelvy.
Shares in Immunomedics had already doubled in value this year, and rose another 106% on market open Monday.
Editor's note: This article has been updated with further details on Gilead's investments and to include comments from analysts.