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Juno/Bluebird Hot Acquisition Targets After Kite/Gilead Deal

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Biotech giant Gilead Sciences, Inc.’s GILD $11.8 billion deal to buy CAR-T cancer therapy designer, Kite Pharma, Inc. KITE has made two other leading independent CAR-T developers, Juno Therapeutics, Inc. JUNO and Bluebird Bio, Inc. BLUE hot takeover targets.

Terms of the Gilead/Kite Pharma Deal

Per the agreement, Gilead will pay $180.00 per share in cash. The total transaction value is approximately $11.9 billion. The price represents a 28% premium over the closing share price of Kite Pharma as of Aug 25, 2017.

The transaction was approved by shareholders of both companies and is expected to close by the fourth quarter of 2017.

While shares of Gilead have shot up 28%, that of Gilead have gone up by almost 3% since the announcement. In-fact, so far this year, Kite Pharma’s stock is up 296.8%which compares favorably with a 9.7% increase registered by the industry.

Why Kite Pharma?                                

Kite Pharma’s CAR-T therapy axicabtagene ciloleucel for treating aggressive non-Hodgkin lymphoma (NHL) is under priority review in the U.S. A decision from the FDA is expected on Nov 29. We believe the solid efficacy profile demonstrated by the pivotal ZUMA-1 study of axicabtagene ciloleucel is likely to support the drug’s approval this year. In Europe, a regulatory application was filed in July 2017 with an approval and launch expected next year.

According to the company, the initial market opportunity for axicabtagene ciloleucel includes about 7,400 and 7,000 addressable CAR-T patients in the U.S. and Europe, respectively, while 7,800 new cases are diagnosed in Japan every year and 25,000 in key urban/eastern rural coastal areas of China.

Meanwhile, other studies with axicabtagene ciloleucel and additional candidates including KITE-585 and KITE-718 are also advancing.

The acquisition should diversify Gilead’s portfolio beyond the struggling HCV franchise and position it to take share in the growing cellular therapy space. The HCV franchise is under pressure because of competition and pricing issues.

Other CAR-T Therapy Makers in Focus

CAR-T is manufactured for each individual patient using their own cells, thereby making it different from typical small molecule or biologic therapies. During the treatment process, T cells are drawn from a patient's blood. These cells are then reprogrammed in the manufacturing facility to create T cells that are genetically coded to express a chimeric antigen receptor to recognize and fight cancer cells and other Bcells expressing a specific antigen.

While the deal might look expensive given the premium Gilead paid for Kite, the CAR-T space is expected to be revolutionary in treatments for cancer.  It represents immense potential at this juncture, thereby attracting the attention of big pharmas.

It goes without saying that following Kite Pharma’s acquisition by Gilead, other small biotechs developing CAR-T therapies like Juno and Bluebird may be bought by a larger biotech, probably by Gilead or even their biggest partner Celgene Corporation CELG.

Juno is developing JCAR017 in partnership with Celgene for NHL, utilizing the CAR-T cell technology. Data presented in June demonstrated a 50% complete response in patients with relapsed or refractory aggressive cd19+ NHL. The company plans to bring JCAR017 to the market for NHL as early as 2018 and for multiple indications by the end of 2019. In fact, shares of Juno are up almost 43% after the Kite/Gilead deal was announced on buyout speculation. The company’s shares are up 132.4% year to date.

Bluebird is developing anti-BCMA CAR T-cell therapy, bb2121, also in collaboration with Celgene. The candidate is only in phase I studies. However, data from an early-stage refractory multiple myeloma study on bb2121 presented in June showed that 100% of the 15 evaluable patients in active dose cohorts achieved an objective response. Overall response rate (ORR) across all cohorts (n=18) was 89%. The investment community believes that the data, though early stage, bode well for the candidate’s future development. Shares of the company are up 66% this year so far.

Meanwhile, other small biotechs like Tesaro Inc. TSRO, Clovis Oncology Inc. CLVS and Puma Biotechnology, Inc. PBYI, which have launched innovative cancer treatments recently, are also potential acquisition targets now.

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Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
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