Shares of cancer treatment drug maker Kite Pharma (KITE - Free Report) soared on Monday morning after Gilead Sciences (GILD - Free Report) officially announced it would purchase the company for a substantial premium.
Gilead is set to pay roughly $11.9 billion in an all-cash deal to acquire Kite and its innovative cancer drug, which aims to make the patient's own immune cells fight-off cancerous tumors.
Gilead’s $180 a share purchase marks a 29% premium from Kite’s Friday close. Kite and Gilead’s board of directors both unanimously approved the deal, which will reportedly close in the fourth quarter.
Shares of Kite reached a new all-time high on Monday, and the company’s shares have already traded hands more than eight times its average volume. Gilead saw its stock price climb 2.48%.
Gilead made it clear in its official announcement that the Kite purchase is designed to diversify its drug offerings. However, the Kite acquisition won’t become neutral in terms of earnings until the third year of the deal, according to Gilead.
“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 President and CEO John F. Milligan 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. We are greatly impressed with the Kite team and what they have accomplished, and share their belief that cell therapy will be the cornerstone of treating cancer.”
Kite’s biggest, most advanced offering is a CAR T therapy called axicabtagene ciloleucel, or axi-cel. The company expects axi-cel to be approved as a treatment to fight aggressive non-Hodgkin lymphoma. The Axi-cel treatment is currently under review by the U.S. Food and Drug Administration, and the FDA’s target action date is November 29, with European approval set for next year.
Gilead grew into a $100 billion biotech company by selling treatments for HIV/AIDS and hepatitis C. Kite’s cancer therapy drug could eventually go beyond the treatment of lymphoma to other forms of blood cancers.
According to some analysts, Kite’s axi-cel sales could reach $1.7 billion by 2022, which would rank the drug within the top 10 in the industry in terms of sales potential.
Gilead stock is currently a Zacks Rank #2 (Buy) and scored an “A” for Value in our Style Score system. Shares of Kite skyrocketed from $45.95 a share in early January to $179.69 per share on Monday. Kite is currently a Zacks Rank #3 (Hold).
Want to know more about Kite? Read: How Kite Pharma Is Revolutionizing the Fight Against Cancer and listen to the podcast below.
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