Giant in antivirus field gets promising therapy for breast
tumors in Immunomedics deal
By Cara Lombardo and Jonathan D. Rockoff
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 14, 2020).
Gilead Sciences Inc. will pay $21 billion to buy biotech
Immunomedics Inc. and its prized breast-cancer drug, the company
said Sunday, a sign of the value of the cancer-drugs business.
Immunomedics has a market value of roughly $10 billion following
a recent surge in its stock, meaning that Gilead is paying up to
secure ownership of the company.
Gilead agreed to pay $88 a share in cash for Immunomedics, whose
shares closed at $42.25 Friday. That represents a 108% premium.
The Wall Street Journal first reported Saturday that Gilead and
Immunomedics were nearing a more than $20 billion deal.
The deal will help Gilead accelerate its efforts to diversify
into cancer, Chief Executive Daniel O'Day said.
"It's allowing us to fast forward the work we've done over the
past several years in developing a true franchise and portfolio in
cancer, and it's really not complete until you have a marketed
product," he said in an interview.
Immunomedics, based in Morris Plains, N.J., sells breast-cancer
drug Trodelvy, which would be attractive to several large
drugmakers, many of which have set their sights on adding more
fast-growing oncology therapies to their portfolios.
Breast-cancer treatment is one of the most lucrative segments of
the world-wide cancer-drugs market, which EvaluatePharma pegs at
$157 billion this year.
The market has become among the most precious in
pharmaceuticals, because advances in understanding the disease have
opened up new opportunities for drugmakers to find treatments that
can help patients, and the therapies can command high prices.
As a result, the biggest drugmakers including AstraZeneca PLC,
Pfizer Inc. and GlaxoSmithKline PLC, have moved to establish
beachheads in cancer treatment, creating a heavily contested
battleground with stalwarts Novartis AG and Roche Holding AG.
The desirability of cancer treatments, especially those like
Trodelvy that have already passed muster with regulators, has sent
premiums soaring.
Trodelvy is among the brightest cancer-drug prospects, showing
signs of success in treating lung and other cancers, too. At a
medical conference this coming week, Immunomedics is expected to
present data on Trodelvy's performance against bladder cancer.
The therapy could ring up $3 billion to $5 billion a year in
annual sales if it proves to work safely against other cancers,
Jefferies & Co. analyst Michael Yee said in a note to
investors.
Though Gilead is paying a big premium, "we would favor a deal as
it adds a blockbuster cancer drug and builds a significant
commercial and R&D oncology biz," Mr. Yee wrote.
In April, Trodelvy was approved in the U.S. to treat a form of
the disease that has spread to other parts of the body and is known
as triple-negative breast cancer.
Triple-negative breast cancer is an especially aggressive form
of the disease that pharmaceutical companies have struggled to
treat because it lacks the molecular targets that drugs can home in
on. It accounts for 10% to 15% of breast cancers, according to the
American Cancer Society.
Discussions between Gilead and Immunomedics were initially
centered around a partnership before shifting to a full-fledged
takeover negotiation and other suitors including Merck & Co.
also expressed interest, people familiar with the matter said.
Gilead, an antiviral-drug leader, has been seeking for years to
increase its portfolio of therapies for other diseases. An
acquisition would give the company a foothold in the fast-growing
cancer drug market, allowing it to build up its commercial
infrastructure for selling a wider portfolio of therapies.
And Gilead doesn't take on any risk that regulators won't
approve the drug, since they already have done it.
The Foster City, Calif., company is best known for its
blockbuster hepatitis C offerings and HIV therapies. Most recently,
Gilead has drawn notice for Covid-19 drug remdesivir, which the
U.S. authorized for use in July and is expected to significantly
boost the company's revenue this year.
Cancer drugs, however, promise to provide Gilead a more enduring
business that could help the company offset declining sales of its
hepatitis C drugs and competition for its HIV franchise.
Mr. O'Day, who took the helm in March 2019, has since been
inking deals designed to bolster the company's portfolio. Up to
now, Gilead has focused its firepower on drugs still in
development.
In 2019, it spent more than $5 billion deepening a partnership
with Belgian biotech firm Galapagos NV. Earlier this year, it paid
about $5 billion for biotech company Forty Seven Inc. and its
blood-cancer drug. And in June, it spent $275 million for a nearly
50% stake in another company focused on cancer treatments,
privately held Pionyr Immunotherapeutics Inc.
"We have done more than 13 deals in oncology over the past two
years," Mr. O'Day said. Trodelvy "really is a foundation product
for us."
Trodelvy belongs to a relatively new class of cancer agents
called antibody drug conjugates. These drugs consist of an antibody
that hunts down cancer cells and carries payloads of chemotherapy
that is deployed to destroy the tumor target.
In 2017, Immunomedics had planned to sell the rights to the drug
to biotech Seattle Genetics Inc., which specializes in antibody
drug conjugates.
But activist investor venBio Select Advisor LLC, which then had
a large stake in Immunomedics, stepped in and blocked the deal,
saying it wasn't in investor interests. The husband-and-wife team
that ran Immunomedics resigned from the company and the activist,
now called Avoro Capital Advisors, gained representation on the
company's board.
Avoro's Behzad Aghazadeh remains Immunomedics' chairman and
Avoro owns a roughly 11% stake in the company, according to
FactSet.
The company's history has been up and down since that battle. In
2019, the FDA postponed approval of Trodelvy, which Immunomedics
said stemmed from chemistry and manufacturing issues. An FDA
inspection found testing and record-keeping problems at the
company's plant.
Immunomedics' share price is up 99% so far this year. Trodelvy
rang up $20.1 million in net sales in its first two months on the
market, which Jefferies analysts said indicated the drug could
become a go-to treatment for triple-negative breast cancer. In
2022, Jefferies estimates, Trodelvy sales will reach $480
million.
Trodelvy could generate even more sales if trials under way find
it works against other cancers, including another form of breast
cancer known as HER2-negative and non-small cell lung cancer.
The companies expect the deal to close by year-end.
Dana Cimilluca contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com and Jonathan D.
Rockoff at Jonathan.Rockoff@wsj.com
(END) Dow Jones Newswires
September 14, 2020 02:47 ET (06:47 GMT)
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