Kite's CAR-T medication, cancer candidates draw choosy Gilead for $12B pipeline-building buyout

Gilead Sign
The takeover of Kite gives Gilead a chance to make cell therapies a cornerstone of its business.

Kite Pharma and its hotly anticipated CAR-T med nabbed an $11.9 billion buyout offer from Gilead Sciences, which has been shopping for oncology assets to diversify away from its flagging hepatitis C franchise. The deal beefs up Gilead's pipeline and puts it toe-to-toe with Novartis for the nascent CAR-T cancer therapy market.

The Kite choice ends a long wait for Gilead to use its mighty cash pile and takes it deep into the world of next-gen I-O research, shoring up its own middling cancer candidates. 

In the near-term, the deal will give Gilead a mooted blockbuster in the form of CAR-T axicabtagene ciloleucel, which has attracted peak sales estimates in the range of $2 billion a year. But with Kite having established itself at the forefront of a major emerging oncology opportunity with very steep barriers to entry, the longer-term prospect of building a tentpole franchise in cellular therapies is the real prize.

Gilead’s ability to realize that prospect will dictate whether the deal joins its $11 billion takeover of Pharmasset—which gave it the hepatitis C franchise—as evidence of its savvy dealmaking skills. Alternatively, if the deal falls short of expectations, it could provide evidence of what happens when a cash-rich company pens a desperate deal.

The big biotech is set to buy Kite for the relatively small premium of 29%. But that premium comes on top of a share price that rose more than 200% over the past eight months as the barriers between Kite and commercial sales came down. The scale of Gilead’s multiyear hepatitis C bonanza means it will still be sat on a considerable sum of money once the all-cash deal closes. 

Check out Kite Pharma's pipeline

Gilead’s identification of CAR-T as the technology around which to build the next stage of its evolution—the first stage of which saw it expand from HIV into hepatitis C—comes eight months after it hired Alessandro Riva to head up its oncology division. Riva joined from Novartis, where he held a similar role.

Oncology has proved a particular frustration for the biotech: Its blood cancer med Zydelig (idelalisib) won an FDA nod in 2014 for three kinds of blood cancer, but serious side effects including death halted six trials using the drug in combination with a variety of others as a first-line therapy.

Late last year, Gilead also posted subpar data from two phase 3 trials of JAK inhibitor momelotinib in patients with the bone marrow disorder myelofibrosis, continuing its struggles in the clinic. The data raised serious doubts about momelotinib’s ability to hold its own against Incyte’s Jakafi (ruxolitinib), let alone unseat the blockbuster incumbent.

Gilead hadn't been playing the game in immuno-oncology, with its pipeline filled with Syk, BTK and BTE inhibitors before today's buy. 

The company has said in the past that it is looking for “novel approaches” to immuno-oncology as it plays catch-up to Bristol-Myers Squibb, Merck and Roche, and many saw the addition of Riva as key to helping it with this mission, which now includes, after many years, a major deal.

The fact Gilead employs someone well acquainted with CAR-Ts and the strengths and weaknesses of Novartis’ lead program and supporting infrastructure suggests the Big Biotech is well placed to judge whether Kite represents a good bet. A lot is resting on the bet, and both manufacturing concerns, as well as lingering safety worries from rival Juno's pipeline, could still cause issues with this cutting-edge tech. 

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“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,” Gilead CEO John Milligan, Ph.D., said in a statement. “The field of cell therapy has advanced very quickly, to the point where the science and technology have opened a clear path toward a potential cure for patients.”

In light of the highly-specialized nature of cell therapies, Gilead is set to leave Kite’s R&D, production and commercial operations intact once the deal closes. These units could all benefit from being part of a deep-pocketed organization that needs them to succeed, although, as the history of M&A shows, that isn’t necessarily a given. 

In its Q&A this morning on the deal, Gilead’s exec team said that it views the acquisition as a “long-term opportunity” for other indications, so not a “one and done kind of acquisition, it was more of a long-term play with multiple product opportunities”. Its med and other pipeline candidates are lined up for a series of blood cancers. 

It also sees Kite’s clinical candidates moving into earlier lines of therapy in oncology in the future. Its CEO Milligan also warned that “to be successful in CART, you need to be relentless on innovation,” meaning it will not be looking to stand still, or rest on its laurels, in this therapy area, especially given the competition coming from Novartis, Juno, Bluebird bio and others.

Novartis was slightly down this morning (and coming amid positive trial news for Ilaris), while fellow CAR-T biotech Juno and Bluebird were up 17% and 10%, respectively.