Gilead's best M&A option? It's not oncology—it's Vertex, analyst insists

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Leerink Parters analyst Geoffrey Porges suggested in April 2015 that Gilead buy cystic fibrosis drugmaker Vertex.

More than two years ago, one analyst touted Vertex’s as Gilead’s best option for a buyout that could chip in top-line growth once times got hard in hepatitis C. Now, those times are hereand that analyst is still singing the same tune.

To Leerink Partners’ Geoffrey Porges, the logic is simple: Gilead “needs a transformational acquisition soon to prop up its falling revenue and growth outlook.” And Vertex checks all the boxes, he wrote to clients Friday.

The way he sees it, the cystic fibrosis drugmaker can provide “shortage, size, security and synergy” that could take Gilead’s five-year revenue trajectory from a compound annual growth rate of -0.5% to 1.9%, he said. And the $32 billion or so in Gilead’s coffers suggests the California company “has the potential to comfortably make a transformative acquisition.”

RELATED: Gilead should buy Vertex, analyst suggestsand the time is now

Sure, Vertex isn’t the type of oncology asset the Big Biotech says it’s interested in pursuing. But to Porges, that’s a good thing.

“We would view an acquisition of a growing and largely de-risked revenue stream, such as Vertex, much more positively than a comparable investment, or set of investments, into the intensely competitive, and technologically uncertain field of oncology,” he wrote.

And while Vertex hasn’t been immune to revenue strugglessales of combo med Orkambi, under payer pressure, haven’t taken off the way the company hoped, and the Massachusetts company chopped sales guidance last Septemberit recently touted phase 3 data for a new combo it hopes can fare better. And it’s still “one of the few options” for Gilead to “offset the risks and inevitable erosion of their legacy product franchises.”

RELATED: With hep C sales crashing, Gilead CEO Milligan concedes M&A is vital for growth

One thing is clear, even to the company itself: With hep C sales freefalling and competition heating up in HIV, Gilead needs to buy something. Its stock has been the worst performer in biotech this year, Porges noted, and it faces “potentially devastating revenue erosion” in 2018.

Gilead, though, is rumored to be looking in another directionand that’s at oncology drugmaker Tesaro, which recently won approval for Zejula, a contender in the red-hot PARP field. Reports say it may not be alone, though, with M&A-starved Sanofi also in the hunt.