M&A Wheels Spin for Gilead Sciences, Inc. (GILD), KOLs Pave the Way for Big Kite Pharma Inc (KITE) Axi-Cel Launch


In the biotech sphere, J.P. Morgan and Cowen are serving strong bullish forecasts for Gilead Sciences, Inc. (NASDAQ:GILD) and Kite Pharma Inc (NASDAQ:KITE). As Gilead revs its engine for merger and acquisition possibilities while bolstering its business development team, one analyst continues to back Gilead’s success. Meanwhile, another analyst sees a yellow brick road ahead to commercial triumph following Kite’s Zuma-1 data results presented over the weekend as well as encouraging chatter from key opinion leaders raring to administer Axi-Cel. Let’s take a closer look:

Gilead Steps on M&A Pedal and Puts Business Development in Focus

After hosting an investor meeting series with companies in his coverage universe, following a discussion with Gilead COO Kevin Young and CFO Robin Washington, J.P. Morgan analyst Cory Kasimov is chiming in with conviction for the biotech giant’s strategies. Therefore, the analyst reiterates an Overweight rating on shares of GILD with an $82 price target, which represents a 22% increase from where the stock is currently trading.

On top of answering a lot of M&A buzz inquiries, GILD’s management team underscored new “manpower” with a fresh business development (BD) prioritization, including new leadership captaining the unit as well as a shift from “some talented R&D people” over to the department. Kasimov commends the giant for opening scale and machinery possibilities to tackle “more proactive work (as opposed to the type of reactive work that happened with MDVN),” noting, “This really kicked in late last year, and the company filled a number of positions early this year (hard to believe these reinforcements took this long considering investors have been acutely focused on the topic for at least two years).”

“In addition to whatever more material transactions the company may complete, going forward we will probably see GILD do more small deals/collabs a la CELG (though not quite as aggressive as CELG). Deals are not tagged to size as much as they are innovation. Also, GILD’s core competencies are not in finding operational efficiencies (so the thinking around the likelihood of a large, transformational deal hasn’t changed). On HIV, questions focused on the potential doublet competition (GILD still not too concerned) and PrEP (annualizing at ~$1B in revs at YE16 with significant growth potential). On the HCV side, GILD underscored that open access doesn’t mean easy access and as the urgency to treat lessens, docs may be dedicating fewer resources to getting patients on drug; the co continues to invest here (new Harvoni DTC recently launched),” Kasimov surmises.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Cory Kasimov is ranked #4,402 out of 4,557 analysts. Kasimov has a 37% success rate and faces a loss of 5.6% in his annual returns. When recommending GILD, Kasimov forfeits 13.0% in average profits on the stock.

TipRanks analytics demonstrate GILD as a Buy. Out of 18 analysts polled by TipRanks in the last 3 months, 12 are bullish on Gilead stock while 6 remain sidelined. With a return potential of nearly 22%, the stock’s consensus target price stands at $81.73.

Kite Has Tremendous Advantage Ahead of Axi-Cel Launch

Cowen analyst Eric Schmidt pegs “major [overall survival] benefit” for Kite in R/R refractory aggressive B-cell non-Hodgkin lymphoma (NHL) on the heels of its full six-month ZUMA-1 trial data release showcasing promise for the firm’s lead CAR-T drug candidate, Axi-Cel (KTE-C19). Kite’s prime one-two punch between Sunday’s 2017 American Association of Cancer Research Annual Meeting in Washington, D.C. coupled with the firm hosting an investor event have left the analyst bullish on both a clinical as well as commercial ground, reiterating an Outperform rating on KITE without listing a price target.

Schmidt highlights, “Axi-Cel’s efficacy was not impacted by any of several subset analyses and mOS has not been reached with a median of 8.7 months of follow-up. KOLs expect FDA approval in 2017 and report their centers are actively preparing for significant patient demand upon Axi-Cel’s launch.”

One of the key opinion leaders (KOLs) at the investor event was Dr. Locke, the Chair of the Moffitt Cellular Therapy Advisory Committee as well as the Chair of the Moffitt Immunotherapy Working Group, who acknowledges that Moffitt Cancer Center’s evaluation of the diffuse large B-cell lymphoma (DKBCL) market has driven a cell therapy infrastructure expansion along with various specialty staffing increases, “gearing up” to administer hundreds of doses per year.

Likewise, Kite hosted Dr. Michael Bishop from the University of Chicago, who pointed to the University of Chicago’s “all-in” mentality tackling T cell therapies.

“Dr. Bishop […] expects CD19 CAR T cells and ultimately T cell products with other specificities to be central to the medical center maintaining and/or growing its leadership position. […] Once a center begins using a T cell provider Dr. Bishop expects the center will use that provider for every eligible patient unless an alternative provider was able to provide a T cell product faster than the entrenched provider. Therefore, he felt a company like KITE would have a tremendous first mover advantage in DLBCL,” Schmidt concludes.

Eric Schmidt has a very good TipRanks score with a 61% success rate and a high ranking of #40 out of 4,557 analysts. Schmidt garners 30.3% in his yearly returns. When recommending KITE, Schmidt gains 36.9% in average profits on the stock.

TipRanks analytics show KITE as a Buy. Based on 15 analysts polled by TipRanks in the last 3 months, 9 rate a Buy on Kite stock while 6 maintain a Hold. The 12-month average price target stands at $86.82, marking a nearly 11% upside from where the stock is currently trading.

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