--Gilead to acquire YM BioSciences for $510 million in all-cash
deal
--YM's lead drug is a potential competitor to Incyte and
Novartis
--The deal comes as Gilead continues to expand its product
pipeline beyond HIV and AIDS
(Updated throughout with additional detail, quotes from
analysts, and updated stock prices.)
By Joseph Walker
Gilead Sciences Inc. (GILD) agreed to buy YM BioSciences Inc.
(YMI) for $510 million in cash, as the drug company looks to boost
its cancer-drug portfolio.
The deal strengthens Gilead's efforts to expand beyond its core
HIV and AIDS franchises and gives it the potential to compete in
the lucrative market for hematology drugs, which treat patients
with blood cancer. But YM's lead drug, CYT387, is its only one in
clinical trials and still years away from reaching the market. The
experimental drug will have to prove its effectiveness in a
late-stage trial that Gilead said it intends to begin in the second
half of 2013.
"This acquisition represents an opportunity to add a
complementary clinical program in the area of hematologic cancers
to our growing oncology portfolio," said Norbert W. Bischofberger,
Gilead executive vice president of research and development, in a
statement.
Gilead will pay a per-share price of $2.95, an 81% premium over
YM's Tuesday closing price. Shares of YM recently surged 72% to
$2.86. Gilead plans to fund the acquisition with cash on hand. The
transaction is expected to close in the first quarter.
That Gilead agreed to pay a high premium to buy YM, and without
the milestone payments typical of many biopharma mergers, suggests
that other large pharmaceutical firms may have been interested in
buying the Toronto-based company, some analysts said. It's may also
be a reflection of Gilead's strong cash position and its desire to
complete the deal quickly.
"It's a very clean deal and one they can close fairly rapidly,"
said Ian Somaiya, a Piper Jaffray analyst. "It also probably points
to the fact that there were multiple parties involved" in
negotiations.
The acquisition comes at a time when Gilead is aggressively
looking to broaden its drug pipeline beyond the HIV and AIDS drugs
that generate the vast majority of its revenues. Last year, it
acquired hepatitis C drug maker Pharmasett Inc. for $11 billion in
cash.
While some investors questioned the Pharmasett deal at the time,
it has since appeared to pay off as shares soared 86% this year to
$76.76 through Tuesday's close, largely on the perceived strength
of its hepatitis C assets. Gilead shares recently rose 32 cents to
$76.66.
With the purchase of YM, Gilead gains an experimental drug to
treat myelofibrosis, a type of chronic leukemia. The treatment,
known as CYT387, is the same class of drug as Jakafi, a treatment
marketed by Incyte Pharmaceuticals (INCY) and Novartis AG (NOVN).
Jakafi was the first drug approved by the FDA in 2011 to
specifically treat myelofibrosis. The drug is on pace to generate
$130 million in revenues in 2012, said Christian Glennie, an Edison
Investments analyst.
However, peak sales could eventually reach between $500 million
and $1 billion, Mr. Glennie said.
Incyte shares fell 7% to $16.66; Novartis fell 10 cents to
$58.75.
Other firms, including Sanofi S.A. (FR:SAN) and Cell
Therapeutics Inc. (CTIC), are also developing drugs known as Jaks,
which work on the Janus kinase enzymes, which are believed to be
one of the root causes of myelofibrosis. Cell Therapeutics rose 5%
to $1.36, while Sanofi fell 15 cents to $71.85.
YM's drug has shown positive results in a mid-stage trial, and
has the potential to improve on areas where Incyte and Novartis's
drug has shortcomings, like decreasing patients' reliance on blood
transfusions, Mr. Glennie said.
Gilead has a number of cancer drugs in development, including
one non-Jak drug treating myelofibrosis patients in a mid-stage
trial, with data expected by analysts in the first half of 2013.
The acquisition also provides Gilead the potential to combine that
pipeline drug with YM's in future trials, Mr. Glennie said.
CYT387 also has the potential to treat other types of
inflammatory diseases and cancers, analysts said.
Myelofibrosis is a progressive, chronic bone-marrow disorder in
which the marrow is replaced by fibrous scar tissue, making it
difficult for the bone marrow to sufficiently produce blood
cells.
Saabira Chaudhuri contributed to this report.
Write to Joseph Walker at joseph.walker@dowjones.com
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