Gilead finally strikes a mega deal. But did it overspend for Kite?
Gilead Sciences is back with a mega deal. But hours after the Californian drugmaker announced its $12bn acquisition of Kite Pharma, some analysts and investors were quick to criticise the drugmaker for having paid too much to buy the cutting-edge cancer treatment asset.
Out of 112 Gilead investors surveyed by Mizuho Securities soon after the deal was announced, 59 per cent said they thought that Gilead had overpaid for Kite.
That's exactly what happened six years ago after Gilead acquired Pharmasset for $11bn. Back then a majority of analysts accused the giant biotech group of making a "risky bet" on next generation hepatitis C treatments (if you need a reminder you should read this negative note of the deal by Morning Star).
But the naysayers were proved wrong as Gilead's 2011 deal turned out to be truly transformational (here is a good piece on the success of Sovaldi, which is the reason it acquired Pharmasset).
Can Gilead repeat itself? Or has it acted in a hasty way under pressure from investors to do a deal?
Umer Raffat at ISI Evercore issued this investor note:
Max Nisen, a smart biotech and pharma writer at Bloomberg Gadfly, was also critical about the deal. Here is what he had to say:
DD spoke to people close to Gilead and they say they will be proved right once again (no surprise here). Their argument is that they are getting in early on a drug that will revolutionise the fight against cancer. By buying the asset ahead of regulatory approval they will also be in a better position to price and market the drug once it's approved (which is 99.9 per cent likely to happen within the next year).
We asked the FT's in-house pharma expert David Crow about what he made of the deal and his answer is probably the most balanced: