What will it take for Gilead to break even on its $21 billion deal?
For years, investors have pestered Gilead Sciences with the same question in myriad phrasings: When are you going to buy something big? Now, 24 hours after the company committed to a $21 billion acquisition, they’re wondering just how Gilead can justify that price.
The deal, which gives Gilead control of Immunomedics, came at a more than 100% premium to the company’s most recent stock price, making it the most expensive large acquisition in 10 years of biotech history, according to the analysts at SVB Leerink. Gilead management said it expects the deal to pay for itself by 2023, but that depends on quite a few things breaking in the company’s favor.
In monetary terms, that would require Immunomedics’ lead drug, IMMU-132, to bring in about $5 billion a year. To get there, the treatment will need to confirm its promise in a host of tumor types. But even if it does, competition could get in Gilead’s way. Partners AstraZeneca and Daiichi Sankyo have a similar medicine in development that could prove superior, and there are ongoing studies of older cancer treatments that might encroach on Gilead’s intended markets.
The deal, which gives Gilead control of Immunomedics, came at a more than 100% premium to the company’s most recent stock price, making it the most expensive large acquisition in 10 years of biotech history, according to the analysts at SVB Leerink. Gilead management said it expects the deal to pay for itself by 2023, but that depends on quite a few things breaking in the company’s favor.
In monetary terms, that would require Immunomedics’ lead drug, IMMU-132, to bring in about $5 billion a year. To get there, the treatment will need to confirm its promise in a host of tumor types. But even if it does, competition could get in Gilead’s way. Partners AstraZeneca and Daiichi Sankyo have a similar medicine in development that could prove superior, and there are ongoing studies of older cancer treatments that might encroach on Gilead’s intended markets.
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