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Gilead to Buy Oncology Company Immunomedics for $21 Billion

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Gilead Sciences, Inc. (GILD - Free Report) announced that it will acquire oncology company, Immunomedics , for $88 per share in cash or approximately $21 billion.

Financial Terms of The Transaction

Per the terms of the merger agreement, a wholly-owned subsidiary of Gilead will immediately commence a tender offer to acquire all of the outstanding shares of Immunomedics’ common stock.

The $88.00 per share acquisition price represents a 108% premium to Immunomedics’ closing price on Sep 11, 2020.  

The acquisition will most likely be funded through approximately $15 billion in cash on hand and roughly $6 billion in newly issued debt.

The transaction is anticipated to close during the fourth quarter of 2020.

Strategic Value of The Transaction

The acquisition will add Trodelvy (sacituzumab govitecan-hziy), a first-in-class antibody-drug conjugate (ADC), to Gilead’s portfolio. Trodelvy was granted accelerated approval by the FDA in April for the treatment of adult patients with metastatic triple-negative breast cancer (mTNBC) who have received at least two prior therapies for metastatic disease. Immunomedics plans to submit a supplemental Biologics License Application (BLA) to support full approval of Trodelvy in the United States in the fourth quarter of 2020. Immunomedics is also on track to file for regulatory approval in Europe in the first half of 2021.

Trodelvy significantly improved progression-free survival (PFS) and overall survival (OS) in previously treated patients with advanced mTNBC in the phase III study. Consequently, the study was halted early due to efficacy based on the unanimous recommendation of the independent Data Safety Monitoring Committee.

Moreover, Trodelvy is being studied in an ongoing phase III study in third-line HR+/HER2- breast cancer and a registrational phase II study in bladder cancer. Additional studies evaluating the potential of Trodelvy as a treatment for non-small cell lung cancer and other solid tumor types are ongoing. The drug is being studied as both monotherapy and in combination with checkpoint inhibitors and other non-immuno-oncology products by Immunomedics and independent investigators.

Our Take

The acquisition and the addition of Trodelvy will accelerate Gilead’s efforts to develop a strong and diverse oncology portfolio.

The drug is approved as a third-line treatment for mTNBC, a difficult cancer to treat, and therefore represents significant market potential. Post-acquisition, Gilead plans to initiate numerous additional mid- and late-stage studies on Trodelvy as both monotherapy or in combination with other products for various oncology indications.

The acquisition will also broaden Gilead’s oncology portfolio/pipeline, which comprises Yescarta, Tecartus and magrolimab. The addition of Trodelvy will immediately accelerate Gilead’s sales.

Gilead’s shares have lost 0.5% in the year so far compared with the industry’s decline of 3%.

The company has been taking strategic steps to strengthen its oncology pipeline in recent times.  

In April 2020, Gilead acquired Forty Seven for $4.9 billion and gained magrolimab, an investigational monoclonal antibody in clinical development for the treatment of a number of hematological cancers. Gilead also acquired a 49.9% equity interest in Pionyr Immunotherapeutics, Inc., a privately held company pursuing novel biology in the field of immuno-oncology. Earlier in the month, Gilead announced an agreement with Jounce Therapeutics, Inc. (JNCE - Free Report) , a clinical-stage company focused on the discovery and development of novel cancer immunotherapies and predictive biomarkers, to exclusively license its JTX-1811 program.

The massive decline in sales of Gilead’s HCV franchise has propelled it to focus on its HIV franchise, Yescarta and other newer avenues. The rapid adoption of Biktarvy maintains momentum in the HIV space amid stiff competition from the likes of GlaxoSmithKline (GSK - Free Report) . However, the company is looking to diversify its portfolio, given the increasing competition in the HIV space.

Gilead currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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