Searching for growth back in 2017, Gilead scooped up CAR-T biotech Kite Pharma for $12 billion. Now, write-offs from that buyout are adding up—and CEO Daniel O'Day feels some "urgency" about hunting deals that deliver a bigger payoff.
Along with its fourth-quarter results, Gilead disclosed an $800 million write-down related to a Kite Pharma setback in indolent non-Hodgkin lymphoma. That followed an $820 million write-down this time last year related to Kite’s multiple myeloma candidate KITE-585.
The charge is a “reminder of a deal that most view as overpriced,” Steven Seedhouse, an analyst with Raymond James, wrote in a note seen by Reuters.
As its hep C juggernauts faced competitive pressures in 2017, Gilead inked the Kite Pharma buyout as a move into new cell therapies and cancer. CAR-T med Yescarta won approval shortly after, and sales for the treatment reached $456 million in 2019. That represented a 72% jump from $264 million in 2018.
Still, that level of sales hasn't been enough to justify the price tag, and Gilead is again looking for future growth prospects. In the meantime, new HIV med Biktarvy has been driving growth and reached $4.7 billion in global sales last year.
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On a Wednesday conference call, J.P. Morgan analyst Cory Kasimov told the management team that “everyone is pretty clearly waiting for the company to engage in more substantial business development.” He asked about Gilead's views on M&A and bringing in drug candidates through other dealmaking.
The company has a “solid pipeline” but does feel a “sense of urgency," CEO Daniel O’Day responded. Gilead plans to be “disciplined” and “take appropriate risks.” O'Day joined Gilead after the Kite buyout.
Aside from the Kite writeoff, Gilead took a $547 million charge on “slow-moving and excess raw materials and work-in-process inventories,” mostly due to lower demand in hep C.
All told in 2019, Gilead generated sales of $22.4 billion, slightly up from $22.1 billion in 2018. The company missed earnings per share estimates in the fourth quarter, partly due to the write-downs, Kasimov wrote in a note.