2018: Gilead is Not Done Shopping

It has been a big stories with Gilead Sciences acquiring Kite Pharma for about $11.9 billion in August last year. Investors and analysts, after all, had been speculating—even nagging—on who the company should buy for several years. The story became even bigger when Kite’s Yescarta, the first chimeric antigen receptor T cell (CAR-T) therapy for relapsed or refractory large B-cell lymphoma, was approved by the U.S. Food and Drug Administration (FDA) in mid-October. This, in particular, marked that Gilead was serious about expanding into other areas than infectious diseases and liver diseases.

Keith Speights, writing for The Motley Fool, notes that the company probably isn’t done with mergers and acquisitions. He also looks at other reasons the company, despite slowing hepatitis C (HCV) sales, is still a good investment in 2018.

1. HIV is still strong.

Unlike the HCV franchise, Gilead’s HIV franchise is still strong and growing. The company has several HIV therapeutics based on tenofovir disoproxil fumarate (TDF), such as Viread, Atripla and Stribild. They were powerhouses from 2001 to 2014. There’s been a shift toward tenofovir alafenamide (TAF)-based drugs, such as Gilead’s Genvoya, Descovey and Odesfsey. They are now responsible for 56 percent of Gilead’s HIV prescription volume. But the company’s not done and hopes to launch a bictegravir/F/TAF combination in the first quarter if the FDA gives it a thumbs-up. It’s believed to be significantly better than the previous drugs, and Gilead says it’s still not done innovating in this space.

2. Liver diseases.

Because of its successes with HCV, the company has been dominant in liver diseases. So successful, that the company’s franchises for HCV essentially cure the disease. As a result, it’s stopped developing new HCV drugs, but expects to stay competitive in the market, primarily against AbbVie’s Mvyret. What’s likely to happen is stabilization and possibly a slow patient decline.

But there are other liver diseases, and one of the big ones Gilead is focusing on is non-alcoholic steatohepatitis (NASH), which acts much like cirrhosis of the liver without drinking alcohol. It is part-genetic, part-lifestyle, with obesity, inactivity and diabetes major risk factors. Currently there are no treatments aside from diet and exercise and the first company to come out with treatments is looking at an enormous market. Gilead has three pipeline candidates for NASH, with ASK1 inhibitor selonsertib the furthest along.

3. Cell therapy.

With the acquisition of Kite, Gilead blasted into the immuno-oncology market. Speights writes, "[CEO] Milligan said the rollout of Yescarta has intentionally been slow because of the complexities involved with the therapy. However, he noted that 16 cancer centers have been certified so far, and that by the middle of 2018 centers that treat around 80 percent of covered patients will be certified."

Gilead would be foolish to rest on its laurels here, and isn’t. Trials are already ongoing to expand indications for Yescarta, and it also has three other candidates in Phase I or Phase II studies. It’s also putting energy into developing possible "off-the-shelf" immuno-oncology therapies.

4. Inflammation.

This likely dovetails with the liver and cell therapy areas. A significant aspect of NASH is inflammation. In 2015, Gilead partnered with Galapagos for JAK1 inhibitor filgotinib, which is currently in three late-stage trials for rheumatoid arthritis, as well as two other late-stage trials for Crohn’s disease and ulcerative colitis.

So it’s possible the company may acquire companies or assets to bolster any of these areas. At the company’s third-quarter, it had $41.4 billion in cash, cash equivalents and marketable securities, which gives it plenty of room to maneuver.