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New Gilead CFO: Let's Make a Deal

With Andrew Dickinson assuming the additional role of chief financial officer at Gilead Sciences (NASDAQ:GILD), the company appears poised to take center stage on "Let's Make a Deal."

A large number of analysts think that adding the role of financial chief to Dickinson's portfolio signals the big biotech is going to be aggressively pursuing mergers, acquisitions and partnerships, according to an Oct. 15 article in FiercePharma.

Dickinson, who will retain responsibility for business development, masterminded Gilead's nearly $12 billion purchase of Kite Pharma in 2017, a deal that got the company into cancer and cell therapy. In July, Gilead laid out nearly $4 billion upfront and made a more than $1 billion equity investment for a larger 10-year research and development agreement with Galapagos (NASDAQ:GLPG), the Belgium-based clinical-stage biotech company. One of the drugs the two have is filgotinib, which is in late-stage trials and so far seems highly effective in treating rheumatoid arthritis.

Given the substantial cost of the Kite and Galapagos transactions, Cantor Fitzgerald analyst Alethia Young speculates that Gilead will go after smaller deals to build its position in new categories like oncology, inflammation, and potentially nonalcoholic steatohepatitis.

The company's urgent acquisitions endeavors are meant to shore up the steep sales decline of the company's hepatitis C business. Fortunately, Gilead's HIV business is still going strong thanks to its new drug Biktarvy. One major challenge is going to be getting patients to switch to its newer HIV drug Descovy, as its predecessor Truvada loses patent protection next fall. Meanwhile, sales of the Kite drug Yescarta have also disappointed.

Another reason to be optimistic about Gilead is the number of seasoned pharmaceutical executives who have recently joined the ranks of management.

Gilead CEO Daniel O'Day has convinced Christi Shaw to take the helm at Kite. She was an executive at Eli Lilly (NYSE:LLY) and the North American oncology head at Novartis (NYSE:NVS) before that. Genentech's early clinical development leader Merdad Parsey came aboard as chief medical officer, and Johanna Mercier was recruited from Bristol-Myers Squibb (NYSE:BMY) to become the commercial chief.

RBC Capital Markets analyst Brian Abrahams thinks that with a new executive management team in place, Gilead can implement a more focused strategy as it moves forward.

Among the companies that may be on Gilead's wish list are:

  • Bluebird bio (NASDAQ:BLUE). The Cambridge, Massachusetts-based biotech is developing gene therapies for severe genetic diseases and cancer. It has a market cap of more than $5 billion. In the past year, its shares have dropped more than 45% to about $91.

  • Madrigal Pharmaceuticals (MDGL). This Philadelphia-area company focuses on the development and commercialization of therapeutic candidates for the treatment of cardiovascular, metabolic and liver diseases. One reason it may be more attractive: it's a lot cheaper than it was. At just under $88, it's well off its 52-week high of nearly $220.

  • Intercept Pharmaceuticals (NASDAQ:ICPT). This New York City biotech is working on developing therapies to treat progressive non-viral liver diseases. Its shares have been battered, too. The stock traded as high as about $132 in the past year; now it's about $64.
  • Allogene Therapeutics (NASDAQ:ALLO). Based in South San Francisco, Allogene is concentrating on genetically engineered therapies for the treatment of cancer. At just under $28, its shares are in the middle of its 52-week range.

Disclosure: The author has a position in Gilead, Eli Lilly and Bristol-Myers Squibb.

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This article first appeared on GuruFocus.