Gilead Sciences has said that it would only use its flush cash reserves for M&A if the right deal came along. Now, with a slowdown in the company’s hep C franchise and a new leader at the helm, it's getting more aggressive about its search.
“It’s time for us to go out and do important deals,” CEO John Milligan told Bloomberg. “We need some other assets that can bolster our pipeline.”
A new cancer product would be key, Milligan said, as Gilead looks to expand in cancer markets as well as liver diseases and inflammatory disorders. The company will keep its scope wide and consider products for many types of cancer, he added. But each deal must answer the question: “What is going to be the cutting-edge technology five years from now, and would I be part of that?” Milligan said, as quoted by Bloomberg.
With $21 billion in cash and equivalents in its coffers, Gilead has some fuel for dealmaking. Milligan is staying quiet about potential targets. But Leerink Partners analyst Geoffrey Porges thinks that the CEO would need to find an asset that would contribute $5 billion to $10 billion in the next 5 to 10 years in order to “move the needle.”
Besides looking for cancer assets, the Foster City, CA-based company is also investing in therapies for nonalcoholic steatohepatitis (NAS). Gilead recently shelled out $400 million upfront for an early-stage drug for NASH, the first deal under new CEO Milligan.
Gilead last quarter reported slumping sales of its hep C superstars Sovaldi and Harvoni as rival products from AbbVie ($ABBV) and Merck ($MRK) gain momentum. Even though some analysts expected the drop, “the magnitude of the decline is stunning,” SVP and portfolio manager of F.L. Putnam Investment Management Steven Violin told Bloomberg at the time.
New deals could help turn the tide. Milligan, who took the reins from former CEO John Martin in March, has said recently that Gilead would “aggressively” pursue deals and be “opportunistic in M&A.”
The company hasn’t done a big deal since it snatched up Pharmasset in 2011 for $11 billion to get its hands on its hep C powerhouse Sovaldi. But some analysts are betting that new leadership a la Milligan will help the company achieve its renewed M&A ambitions. The CEO might not hit the target “every time, but over time this a guy you want to bet on,” Evercore ISI analyst Mark Schoenebaum told Bloomberg.
- read the Bloomberg story
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