What Are the Implications of Gilead’s Increased Focus on Oncology? 5-Star Analyst Weights In
Gilead Sciences (GILD) isn’t a one-trick pony. While the news coverage has largely fixated on its potential COVID-19 treatment, remdesivir, the large-cap has an increasingly diverse pipeline.
In addition to the headline grabbing remdesivir, Gilead is the biggest player in the HIV space, manufacturing what could become the best-selling HIV drug ever, Biktarvy.
Having said that, Gilead has been expanding, and through a series of M&As, building an increasingly strong oncology portfolio. Following the addition of Kite in 2018 and the more recent acquisition of cancer-focused biotech Forty Seven, Gilead has just inked a deal with immuno-oncology player Arcus Biosciences. They have agreed to a 10-year partnership to develop next-generation cancer immunotherapies. Arcus will bring a number of immuno-oncology assets to the table, including a PD-1, anti-TIGIT, CD73 inhibitor, and a dual A2a/A2b antagonist, and in return, will receive $175 million upfront, a $200 million equity investment and R&D funding to the tune of $1.6 billion.
Gilead has a similarly structured, though larger, deal in place with Galapagos. In total, Gilead invested $5.1 billion in the Belgian-Dutch biotech last year. The two are working together on rheumatoid arthritis treatment, filgotinib, which is currently awaiting U.S. and European regulatory approval.
Weighing in for Maxim Group, analyst Jason McCarthy believes Gilead’s ever-growing portfolio will present the large-cap with fresh opportunities.
The 5-star analyst said, “With near-complete dominance in HIV and a steadily declining Hep-C franchise, inflammation and oncology have been positioned as the next growth areas for Gilead. Deals like the Galapagos and Arcus partnerships represent an attractive structure for Gilead, granting them access to deep therapeutic candidate pipelines while mitigating risk by not acquiring the companies outright. More 'bolt-ons' like Galapagos and Arcus, or full acquisitions? We'll see as Gilead continues its transformation.”
Waiting to see how things play out, McCarthy maintains a Hold recommendation on Gilead. He also has not set a price target. (To watch McCarthy’s track record, click here)
The rest of the Street appears to be reading from the same page as the Maxim analyst. Based on 15 Holds, 9 Buys and 4 Sells, the analyst consensus rates GILD a Hold. There’s upside of 7% in the cards should the $79.95 average price target be attained over the next 12 months. (See Gilead stock analysis on TipRanks)
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