M&A

Diving deep into CAR-T, Gilead forges $12B buyout deal for Kite Pharma

Gilead has forged the big, transformational buyout deal that everyone in the industry has been waiting for.

Gilead $GILD has agreed to buy CAR-T pioneer Kite Pharma $KITE — which is likely just months away from its first approval — for $11.9 billion in cash.

The buyout will instantly make Gilead a leader in adoptive cell therapy, going head-to-head against Novartis’ leading effort with CTL019. And in a call with analysts early Monday, Gilead execs underscored that while cell therapies would become the cornerstone of their work in oncology, the business development team is pursuing more pacts to build that segment of the pipeline.

Gilead agreed to forge the deal at a price of $180 a share, a relatively modest 29% premium of the company’s already swollen share price. Just three years ago, though, Kite went public with an IPO that initially priced at $17 a share. The buyout price represents a 960% increase on that.

The biggest single beneficiary of the buyout will be Kite CEO Arie Belldegrun, whose 5.9% stake in Kite — listed in the latest available proxy statement — is today worth $597,706,380.

Arie Belldegrun

Kite’s leading drug is axi-cel, which comes with a peak sales estimate hovering close to $2 billion a year. But the company has also been actively working on a slate of next-gen cancer therapies that promise to move beyond the initial re-engineering work with chimeric antigen receptors in an effort to move beyond blood cancers and into solid tumors.

For Gilead, it’s a chance to forge a new business that can be reliably lined up next to its foundational work in HIV, where it continues to be an industry leader. Gilead paid $11 billion for Pharmasset to break into the hep C market. The company accomplished that task with flying colors, but after watching sales swell into megablockbuster territory, revenue has peaked and is expected to slide in coming years.

That combination of financial firepower — Gilead can easily fund this deal relying on its cash reserves — and a need to build the business put Gilead in a perfect spot to acquire Kite just as the biotech neared a major crossroad.

For Kite CEO Belldegrun, the buyout marks the end of a major drive to create a company that could develop and market a personalized cell therapy. Kite has worked closely with the NCI’s Steven Rosenberg, the scientist who helped pioneer CAR-T therapies.

This acquisition also has some implications for the industry. M&A has been lacking so far in 2017, with big players like Pfizer holding back in anticipation of tax reform legislation that would allow them to move billions from overseas accounts. Gilead CEO Milligan, though, has consistently maintained that to run a biopharma company properly, you need to ignore what’s going on in Washington and make decisions. He may inspire others to follow suit, oiling the tracks on more deals.

John Milligan, Gilead CEO

“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,” said John Milligan, Gilead’s president and CEO. “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. Our similar cultures and histories of driving rapid innovation in order to bring more effective and safer products to as many patients as possible make this an excellent strategic fit.”



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