Gilead on Sunday reached a deal to buy Immunomedics for approximately $21 billion, agreeing to pay more than double the New Jersey drugmaker’s market value to gain access to its recently approved breast cancer medicine.In April, Immunomedics won an accelerated clearance from the Food and Drug Administration for Trodelvy, a treatment for an aggressive form of breast cancer and the company’s first-ever approved drug. Gilead expects Trodelvy could work in other types of breast cancer, as well as in tumors of the bladder and lung. The acquisition, which would rank as the biotech industry’s largest this year, is the latest sign of Gilead’s intent under CEO Daniel O’Day to accelerate a long-running push to become a player in the lucrative market for cancer drugs. Historically known for its HIV and hepatitis C treatments, Gilead has spent years trying to build an oncology business, but cancer drugs still account for a small portion of its revenue.
Since March, when Gilead bought biotech Forty Seven and its experimental treatment for leukemia and lymphoma, the company has inked a series of eight research partnerships and collaborations to expand its presence in oncology.
Gilead’s pipeline of experimental cancer drugs has significantly expanded as a result and, by buying Immunomedics, the company adds an already on the market therapy in Trodelvy. Notably, the deal would also give Gilead an entry point into solid tumors. Its only approved cancer drugs treat blood cancers.
“We are fast-forwarding our plans to build a substantial oncology business with significant potential,” said O’Day on a Sunday conference call with analysts and investors.
The deal will cost Gilead, however, and could bring criticism from investors that the biotech overspent. At a proposed buyout price of $88 per Immunomedics share, Gilead will pay an 108% premium over the stock’s closing price on Friday.
If the deal closes as expected later this year, Gilead will have invested just over $27 billion upfront in cancer companies this year, a significant sum even considering the cash reserves Gilead has to deploy.
Gilead will fund the acquisition with roughly $15 billion of the $21 billion in cash it had on hand at the end of June, as well as $6 billion in newly issued debt.
The deal will likely limit the company’s ability to pursue other high-dollar deals, although Andrew Dickinson, Gilead’s chief financial officer, said Sunday it could still consider deals similar to the $5 billion acquisition of Forty Seven.
“You don’t do a $21 billion deal every year,” he said on the conference call.
Sales of Trodelvy have not amounted to much since the drug was launched two months ago, but Gilead expects significant growth, forecasting the acquisition will add significantly to its profits beginning in 2024.
Discussions with Immunomedics about a potential deal began six months or so ago, according to O’Day, and Gilead’s confidence grew after a study of Trodelvy was stopped early in April due to signs breast cancer patients were benefiting greatly from treatment.
The trial, called ASCENT, tested Trodelvy in patients with metastatic triple-negative breast cancer, an aggressive form of the disease that’s unresponsive to standard hormone and targeted drugs. The results, which will be presented next weekend at the European Society for Medical Oncology’s virtual congress, should serve as confirmation of the accelerated approval granted by the FDA in April.
Immunomedics has studied Trodelvy in other types of previously treated breast cancer, as well as in bladder and lung cancer.
Trodelvy is an antibody-drug conjugate, a type of treatment that pairs a toxic compound with a special protein designed to target tumor cells. In Trodelvy’s case, that protein seeks out a receptor called Trop-2, which helps tumors grow, divide and spread.
Other companies, including AstraZeneca and Seattle Genetics, are exploring antibody-drug conjugates in cancer types targeted by Immunomedics and Gilead.
Merdad Parsey, Gilead’s chief scientific officer, acknowledged the potential for competition on Sunday’s call, but claimed Trodelvy’s safety profile would make it a compelling choice.
For Immunomedics, the deal completes a remarkable turnaround from four years ago, when the company was worth just a few hundred million dollars. Investors’ patience was further tested in early 2019, when the FDA rejected Immunomedics’ first attempt to win approval for Trodelvy.