Let’s kick things off with the big news today – healthcare giant Gilead Sciences, Inc. (NASDAQ:GILD) just reported that it is set to acquire Kite Pharma, Inc. (NASDAQ:KITE) for $180 per share. The transaction will be all cash deal and, at that price, values Kite at around $11.9 billion. the deal likely won’t close before the end of the fourth quarter of this year as these sorts of mega-bucks transactions generally require a substantial amount of back-and-forth before completing. With that said, however, there is no doubt that a large portion of this back-and-forth was completed before the announcement was made, meaning there is a solid chance that it will close out and that it is just a matter of time.
For those unfamiliar with Kite, the company is primarily an oncology entity and its lead development asset right now is a drug called axicabtagene ciloleucel (axi-cel). It is a CAR T type therapy currently under priority review by the FDA for the treatment of refractory non-Hodgkin lymphoma and it has a PDUFA date set for November 29, 2017. It’s this asset that is likely at the root of Gilead’s interest in Kite, with the CAR T space having attracted a large amount of attention in oncology over the last 5 to 10 years. Numerous companies also have late stage assets of this type in development and the willingness of Gilead to take a gamble on axi-cel picking up approval come November (and not just any gamble, a $12 billion gamble) has sent waves across the healthcare and biotechnology markets that the treatment is viable and could be incredibly valuable.
As is generally the case when the sort of large-scale event hits press, the news is impacting the above-mentioned numerous companies, many of which are running up this week on the back of the takeover. ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), Juno Therapeutics Inc (NASDAQ:JUNO) and Bellicum Pharmaceuticals Inc (NASDAQ:BLCM) have all picked up double-digit revaluations on the back of the development.
Another notable mover during the early week is Advanced Accelerator Applications S.A. (NASDAQ:AAAP). The company announced on Monday that the FDA has accepted a resubmission of a New Drug Application (NDA) for one of his lead development assets, a drug called Lutathera. Advanced Accelerator is trying to get the asset approved as a treatment for patients with gastroenteropancreatic neuroendocrine tumors (GEP-NETs) and initially submitted the NDA, as supported by what looked like some pretty robust made to late stage data, in 2016.
Fast-forward to January 2017, however, and the FDA issues a Complete Response Letter (CRL) requesting that revisions be made on the current data set. The company took a bit of a hit on the news, but the fact that no new trials were requested limited the negative impact somewhat. When a biotechnology company, and especially one at the smaller end of the market, carries a drug through development and towards regulatory submission, the cost of doing so is one of the major limiting and major risk factors associated with the process. If said company has to extend that process (as will be the case if the FDA required additional trials on top of those used to underpin a registration application) the company will generally have to raise funds. The way these companies raise money is by issuing equity and the issue of equity is almost always dilutive to the current shareholder base.
Anyway, that didn’t happen here, so as mentioned, the downside impact was somewhat limited. The latest news is that the resubmission has been accepted as is, validating the suggestion that no new trials would need to be carried out, and Advanced Accelerator is picking up strength on the back of this validation.
The agency has also set a PDUFA date for the drug, meaning markets now have a concrete timeframe with which to work in terms of calculating risk ahead of any FDA decision. The PDUFA date is selected for January 26, 2018 and we expect Advanced Accelerator will continue to appreciate heading into this date in anticipation of a positive outcome as and when it hits.