Dive Brief:
- Gilead wants to remain flexible on M&A options, company executives told investors at a Credit Suisse healthcare conference earlier this week.
- Gilead President and CEO John Milligan said his "preference is to try to put together a series of smaller transactions where we can bring in very specific products, where we can then accelerate or add to the future revenues much like we did with sofosbuvir from Pharmasset."
- Analysts suggested a small deal could be in the $1 billion to $2 billion range for Gilead. "I think you have to look at a range of different kinds of transactions. Obviously, you want them to be larger than that, but they don't have to be. If you can get it to market quickly, and ...market it with a fairly efficient sales force, these can be good pieces of business for us," said Milligan in response.
Dive Insight:
In September, Gilead executives told a Citi conference that all options were on the table for future M&A, but ruled out splitting off the company's hepatitis C business from the rest of its drug portfolio. At the time, executives hinted at taking a more gradual approach instead of seeking a transformative deal, perhaps by pursuing an attractive medium-sized company along with one or two smaller firms.
On November 7, Milligan told the Credit Suisse conference that Gilead is focused first on expense management for 2017 as the patient numbers in hepatitis C virus moderate, along with stabilizing HCV and then growing HIV. "Those are really the key things for us and then M&A on top of it," he said.
On the M&A front, Milligan said Gilead is "trying to look for deals where we can utilize the knowledge and skills that we have to accelerate things to market and get more value out of it that we might have to pay upfront."
For example, in the case of Pharmasset's sofosbuvir, Gilead knew the product, a chronic HCV therapy, well, Milligan said. "We knew that we could accelerate the timelines to market. We knew that we have products that could add to the value of it by combining them and that we could execute on this very, very quickly with the team that we had," he added.
Milligan explained that "some things are fully priced these days, and it's hard to see what the upside is. And so, you have to make a choice. Are you willing to take that gamble that you can get more out of it or at least get what you pay for versus trying to continue to hunt for better assets. And, right now, we're hunting for better assets."
While Milligan wouldn't reveal where Gilead is looking for those better assets, at least one analyst is speculating that Alexion Pharmaceuticals could be the right fit. Jefferies analyst Brian Abrahams said in a November 8 note to investors that pros of the deal include expansion into biologics/antibodies, an area of interest to Gilead that would have "greater protection from long-term patent cliffs."
Rare disease is likely to remain an attractive area that is relatively insulated from pricing pressure, he said, and high growth and new product launches could help offset Gilead's declining HCV revenues. Moreover, he said, Alexion, though large, is a "reasonably simple organization" that would fit well into Gilead’s M&A strategy.
Abrahams cited cons to a deal between Gilead and Alexion, including uncertainty surrounding new product launches and potential biosimilars to compete with Alexion's Soliris (ALXN1210). Moreover, he said, "adding premium-priced orphan therapies to the pipeline might exacerbate political pushback Gilead has already experienced."