The price paid by Gilead Sciences (GILD) “more than adequately” reflects potential value from Kite Pharma’s (KITE) AxiCel and adoptive cellular therapy pipeline, Wells Fargo analyst Jim Birchenough tells investors in a research note.
The analyst sees “little chance” of a higher offer or a price bump by Gilead. He raised his price target for Kite shares to $180 and keeps a Market Perform rating on the name.
The stock in afternoon trading is just below Gilead’s $180 per share takeover offer at $178.12. The shares are up 28% on the day, or $39.02.
CAR-T stocks rise after Gilead announces $12B Kite Pharma purchase
Gilead Sciences (GILD) has announced that it is acquiring Kite Pharma (KITE) for nearly $12B. Commenting on the announcement, both Credit Suisse and Leerink said Gilead is unlikely to invest in other CAR-T players given the size of the deal, and should “only do small bolt on deals.” Meanwhile, stocks of several players in the sector have jumped following the news.
KITE PHARMA ACQUISITION: Gilead and Kite Pharma have announced that the companies have entered into a definitive agreement pursuant to which the former will acquire the latter for $180 per share in cash. The transaction, which values Kite at approximately $11.9B, was unanimously approved by both the Gilead and Kite Boards of Directors and is anticipated to close in the fourth quarter of 2017. The transaction will provide opportunities for diversification of revenues, and is expected to be neutral to earnings by year three and accretive thereafter.
NEW CHAPTER: Commenting on the acquisition, Credit Suisse analyst Alethia Young told investors that a new chapter begins in Gilead’s pipeline potential with Kite Pharma’s acquisition. While the analyst was surprised with the deal, she is “certainly encouraged” that Gilead acquired Kite Pharma, which is a CAR-T platform technology company in oncology. The analyst argued that this lifts the biggest overhang on the story, namely “what will Gilead do?” Young now views the Kite platform as the centerpiece by which Gilead will build in immuno-oncology and, therefore, would only expect Gilead to do small bolt on deals from here in oncology perhaps to expand combination potential with CAR-T. She reiterated an Outperform rating and $79 price target on Gilead’s shares.
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