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Did Gilead Pay Too Much for Immunomedics?

Analysts' opinions differ, but what's clear is the company is intent on expanding its cancer therapy business

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Sep 29, 2020
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Some investors are questioning whether the $21 billion Gilead Sciences Inc. (

GILD, Financial) agreed to pay for Immunomedics Inc. (IMMU, Financial) last week was too much.

RBC Capital Markets analyst Brian Abrahams doesn't think so. FiercePharma reported that he said the crown jewel in the deal, the cancer drug Trodelvy, could generate nearly $5 billion in peak sales just for breast cancer. He made that prediction after talking with "a renowned oncologist" responsible for the breast cancer division at a major research hospital and institute in the U.S.

Optimism about Trodelvy was boosted by data showing the drug extended life. The information was presented last weekend at the European Society of Medical Oncology virtual congress.

Data from a phase 3 trial showed that Trodelvy reduced the risk of death by more than 50% among metastatic triple-negative breast cancer patients who had previously failed on at least two chemo regimens. But the news isn't all good. The drug is tied to a high rate of side effects, including diarrhea and nausea. Academic breast cancer expert SVB Leerink analyst Geoffrey Porges called Trodelvy a "fancy chemotherapy"—as opposed to a true targeted therapy—that carries some tolerability issues just like chemo drugs do.

But the true potential of the drug won't be known until it shows effectiveness against other types of cancers. That's the opinion of Bernstein analyst Ronny Gal, who thinks the drug needs to reach a minimum of $4 billion in sales at its peak to make the Immunomedics buy a good one and to reach that mark the company needs to show effectiveness against other types of tumors. If this proves to be the case, Gilead just might have earned itself a bargain.

The Immunomedics purchase may well be the defining deal of CEO Daniel O'Day's tenure at Gilead, as he strives to make the company a major player in cancer medications.

Trodelvy is known as a targeted therapy called an antibody drug conjugate, reported Xconomy. It fastens itself to a powerful cancer-killing treatment and makes a direct strike on tumors, while leaving healthy cells alone. Other ADC companies include ADC Therapeutics (

ADCT, Financial), ImmunoGen Inc. (IMGN, Financial), Mersana Therapeutics Inc. (MRSN, Financial), Seattle Genetics Inc. (SGEN, Financial), Sutro Biopharma (STRO, Financial) and Zymeworks Inc. (ZYME, Financial).

Biotech investor Brad Loncar thinks the biggest takeaway from the Immunomedics deal is that more big pharma companies think ADC drugs are ready to take center stage. In an article in Nasdaq, Loncar said he thinks the future of oncology therapy centers on using cancer drugs in combination that are both effective and tolerable, and ADCs seem to meet both criteria.

Gilead and O'Day have been on a mission to beef up its cancer offerings this year. The San Francisco-based company with a market cap of nearly $80 billion started wheeling and dealing in March by paying a hefty premium of nearly $5 billion to acquire Forty Seven and its promising cancer treatment magrolimab. Two weeks before the Immunomedics announcement, Gilead said it was shelling out $120 million for rights to a drug from Jounce Therapeutics Inc. (

JNCE, Financial). Earlier in the summer, Gilead took large equity stakes in two private concerns.

Disclosure: The author has a position in Gilead.

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