In an Aug. 28 research report, Maxim Group took a look at Gilead Sciences Inc.'s (GILD:NASDAQ) plans to acquire Kite Pharma (KITE:NASDAQ), "an industry leader in the emerging field of cell therapy," as described by analyst Jason Kolbert. The former "is acquiring all of the outstanding shares of common stock at a price of $180 per share in cash" and "plans to finance the transaction with a combination of cash on hand, bank debt and senior unsecured notes."
About the transaction, Kolbert concluded, "The deal is not likely to be accretive near term, but it does position Gilead as a global oncology company and secures the company's future."
The $11.9 billion price "represents a 29% premium to Kite's closing price on Friday, Aug. 25, and a 50% premium to the company's 30-day volume-weighted average stock price," Kolbert indicated.
The analyst assessed that "Kite's acquisition price is reasonable" when "discounting back future sales," which he estimated to be "$1.4B by 2025." He added, "If we assume a similar level of European Union sales and factor in China and Japan, we could see global revenues in the $5B range in the out-years."
Maxim noted it has confidence in Kite's earning potential. "While it will take time for the sales to build, and manufacturing hurdles exist, we think the revenues will materialize," Kolbert said.
As for the commercialization timeline, approval is anticipated near term in the United States and Europe for Kite's most advanced immunotherapy candidate, the CAR-T therapy axicabtagene ciloleucel (axi-cel). "It is expected to be the first to market as a treatment for refractory aggressive non-Hodgkin lymphoma (NHL)," wrote the analyst.
The U.S. Food and Drug Administration has "set a target action date of Nov. 29, 2017 under the Prescription Drug User Fee Act," and "approval in Europe is expected in 2018," added Kolbert.
Regarding Kite's pipeline, it "has additional candidates in clinical trials in both hematologic cancers and solid tumors," wrote Kolbert.
With the acquisition, Gilead will "become a player in the chimeric antigen receptor T cell (CAR-T) space," Kolbert predicted, as Kite "has developed engineered cell therapies that express either a CAR or an engineered T cell receptor, depending on the type of cancer."
Maxim's report also included notes from a recent Gilead press release, which indicated that for its new CAR-T platform and pipeline, the company plans to finish manufacturing preparations, launch axi-cel in the U.S. and build infrastructure for the drug in Europe. It further indicated the company aims to continue with Kite's various programs "to broaden axi-cel utilization in earlier lines of therapy in aggressive NHL and other B-cell malignancies," Kolbert reported. Gilead plans to progress "additional CAR Ts to treat multiple myeloma and acute myeloid leukemia" and "T cell receptors for potential use in solid tumors."
Currently, Maxim has a Hold rating on Gilead and Kite. Gilead's stock is trading at about $75.30 per share and Kite's at $179.19 per share.
Want to read more Life Sciences Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following company mentioned in this article is a billboard sponsor of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.
Disclosures from Maxim Group, Gilead Sciences, Company Update, Aug. 28, 2017
I, Jason Kolbert, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report.
I, Jason McCarthy, Ph.D., attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report.
I, Gabrielle Zhou, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report.
The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firm’s total revenues, a portion of which is generated by investment banking activities.
Maxim Group makes a market in Gilead Sciences Inc.