Gilead Sciences, Inc. (GILD) Gets the Edge in Oncology Sector With Kite Pharma Take Over

Gilead Pivots to Cell Therapy; Cowen's Phil Nadeau Weighs in


Gilead Sciences, Inc. (NASDAQ:GILD) made a bold move by acquiring Kite Pharma Inc (NASDAQ:KITE) as a step towards building up its oncology franchise. The acquisition, which was approved unanimously by both boards presents GILD new opportunities to expand revenue, turn earnings-neutral after three years and become accretive down the line. Furthermore, due to Kite’s deep involvement in T-cell directed therapies and considering that 10 of its centers have already passed FDA pre-approval, GILD is now in a better position to compete in the CAR-T field.

Analyst Phil Nadeau of Cowen expects the deal to bring several fundamental changes to GILD:

  1. “Through the YE:17 U.S. launch of Axi-Cel, Gilead now has an innovative new product that will contribute to revenue over the next several years […] Schmidt’s Kite estimates project that Axi-Cel will produce $785MM in revenue in third-line aggressive NHL by 2022. Therefore, we anticipate Axi-Cel will fill about 20% of Gilead’s anticipated revenue “hole” based on its current BLA/MAA filings. Label expansions are possible into several other tumor types, each of which addresses ~5K U.S. patients (see below), nearly the size of the third line aNHL market in the U.S. (approx. 8K people). While Axi-Cel itself will probably not stabilize Gilead’s revenue, we expect it to fill a meaningful portion of the anticipated $4b “hole.”
  2. “Gilead will enter the CAR-T field, gaining expertise and a number of other pipeline programs. Kite has established a leading CAR-T platform, including manufacturing capabilities, and a broad and diverse pipeline.

Citing extensive research on Kite’s programs, the analyst remains “confident both in the potential of Axi-Cel to become a standard therapy in the treatment of aggressive non-Hodgkin’s Lymphoma, as well as Kite’s leadership position in the CAR-T field.”

As such, the analyst maintains an Outperform rating on GILD with a target price of $90.00 representing a 16% rise above current trading levels. (To watch Nadeau’s track record, click here)

TipRanks analytics exhibit GILD as a Buy. Out of 14 analysts polled by TipRanks in the last 3 months, 10 are bullish, while 4 are sidelined on Gilead stock. With an upside potential of 9%, the stock’s consensus target price stands at $84.00.

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