Gilead Sciences has agreed to acquire Kite Pharma for approximately $11.9 billion, the companies said today, in a deal that combines the chimeric antigen receptor T-cell (CAR-T) pipeline of Kite, a leading cancer immunotherapy developer, with the buyer’s specialty drug portfolio, including hepatitis treatments beset by declining sales.

Kite and rival Novartis are seeking the first FDA approval of a CAR-T therapy. In May, the U.S. regulator accepted for priority review the company’s Biologics License Application (BLA) for lead CAR-T therapy axicabtagene ciloleucel (formerly KTE-C19) for treating relapsed or refractory aggressive non-Hodgkin lymphoma (NHL) in patients who are ineligible for autologous stem cell transplant. The FDA has set a November 29, 2017, Prescription Drug User Fee Act (PDUFA) target action date.

In July, Kite submitted the first CAR-T application in Europe, a marketing authorization application to the European Medicines Agency seeking approval of axicabtagene ciloleucel for patients with relapsed/refractory diffuse large B-cell lymphoma (DLBCL), transformed follicular lymphoma (TFL), and primary mediastinal B-cell lymphoma (PMBCL) who are ineligible for autologous stem cell transplant. Kite expects to win European approval next year.

“CAR T has the potential to become one of the most powerful anticancer agents for hematologic cancers,” Arie Belldegrun, M.D., FACS, Kite’s chairman, president, and CEO, said in a statement. “With Gilead’s expertise and support, we hope to fulfill that potential by rapidly accelerating our robust pipeline and next-generation research and manufacturing technologies for the benefit of patients around the world.”

Kite’s advancement of axicabtagene ciloleucel—and Gilead’s combination of fading sales for blockbuster hepatitis treatments and clinical setbacks—landed both companies on GEN’s Top 10 Takeover Targets of 2016 list last October.

Kite has reported positive data from the pivotal ZUMA-1 trial for axicabtagene ciloleucel in patients with chemorefractory aggressive B-cell NHL. And while the company in May acknowledged the death of a patient due to cerebral edema following multiple organ failure, Kite said it was the only such case of 300-plus patients treated with the therapy, and that the patient showed rapidly progressing refractory NHL before being dosed.

Axicabtagene ciloleucel has been awarded breakthrough therapy designation by the FDA for diffuse large B-cell lymphoma (DLBCL), transformed follicular lymphoma (TFL), and primary mediastinal B-cell lymphoma (PMBCL).

CAR-T, TCR Pipelines

In addition to axicabtagene ciloleucel, Kite’s CAR-T pipeline includes:

  • KITE-585, designed to target B-cell maturation antigen (BCMA) expressed in multiple myeloma. Earlier this month, Kite submitted to the FDA an Investigational New Drug (IND) application to launch a Phase I, first-in-human trial.
  • A fully human second-generation anti-CD19 chimeric antigen receptor-based product candidate directed against B-cell malignancies. Last year, the NIH’s National Cancer Institute (NCI), began a Phase I clinical trial of the product candidate in patients with B-cell malignancies under an existing Cooperative Research and Development Agreement (CRADA) between Kite and the NCI.
  • Two preclinical CAR-T candidates, acute myeloid leukemia treatment KITE-796 and a humanized anti-CD19 control CAR against blood cancers.

Kite’s pipeline also includes several T-cell receptor (TCR) engineered cell therapies, of which four are in Phase I. They include KITE-718, a T-cell therapy engineered to express TCRs that target melanoma-associated antigen 3 (MAGE A3) and MAGE A6; another candidate targeting MAGE A3 and MAGE A6; an anti-MAGE A3 candidate; and a candidate directed against human papillomavirus (HPV)-16 E6 and E7 oncoproteins to treat HPV-associated cancers.

“The acquisition of Kite establishes Gilead as a leader in cellular therapy and provides a foundation from which to drive continued innovation for people with advanced cancers,” John F. Milligan, Ph.D., Gilead’s president and CEO, said in a statement.

Fading Blockbusters

Gilead expanded into hepatitis C drugs when it acquired Pharmasset for about $11 billion in 2011. Three years later, Gilead achieved blockbuster status for hepatitis C treatment Sovaldi® (sofosbuvir), which rocketed that year to $10.283 billion in sales, second only to Humira® on GEN’s list of the Top 25 Best Selling Drugs of 2014.

Yet the company faced criticism over Solaldi’s $84,000 list price for a full 12-week treatment course. Worse for Gilead, cost and competition from other treatments lowered Sovaldi sales last year to $4.001 billion, dropping the drug to 17th highest in sales and thus off of GEN’s list of the Top 15 Best Selling Drugs of 2016.  

Gilead also saw sales declines last year for another hepatitis C drug: Harvoni® (ledipasvir 90 mg/sofosbuvir 400 mg) dropped 34.5% year-over-year, to $9.081 billion, due to larger discounts to insurers. Beyond hepatitis, the human immunodeficiency virus-1 (HIV-1) treatment Atripla® (efavirenz/emtricitabine/tenofovir disoproxil fumarate) sales fell nearly 17%, to $2.605 billion.

In addition, Gilead has seen clinical setbacks: In September 2016, Gilead halted a Phase II/III trial of its GS-5745 in ulcerative colitis patients, six months after halting six trials of cancer candidate Zydelig® (idelalisib) in combination with other treatments, following reports of deaths and other adverse effects.

Hence Gilead’s projection in its press release that the acquisition “will provide opportunities for diversification of revenues.” Gilead also said the deal was expected to be neutral to earnings in the third year following completion and would add to those earnings in the fourth and subsequent years.

The companies did not disclose what if any cost-cutting “synergies” they would implement, though they said Kite would continue to carry out R&D and commercialization operations from Santa Monica, CA, where the company is headquartered, and would continue product manufacturing in El Segundo, CA.

Kite has completed commercial launch and manufacturing preparations for axicabtagene ciloleucel, and is building such infrastructure in Europe, the companies added.

A wholly owned subsidiary of Gilead plans to commence a tender offer to acquire all outstanding shares of Kite’s common stock at $180 per share cash. That price represents a 29% premium to Kite’s closing on Friday and a 50% premium to the company’s 30-day volume weighted average stock price.

Following successful completion of the tender offer, Gilead will acquire all remaining shares not tendered in the offer through a second-step merger at the same price as in the tender offer. Should the deal fall through, Gilead will pay Kite a $356 million termination fee, Gilead said in a regulatory filing.

The boards of both companies have approved the deal, which is expected to close in the fourth quarter, subject to a minimum tender of at least a majority of outstanding Kite shares on a fully diluted basis, the expiration or termination of the waiting period under the Hart–Scott–Rodino Antitrust Improvements Act, and other customary conditions.

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