What happened
Shares of cancer specialist Immunomedics (IMMU) rose by an astounding 106.4% in pre-market trading Monday morning. The biotech's shares are ripping higher this morning in response to a $21 billion buyout agreement with industry giant Gilead Sciences (GILD 0.40%).
Gilead reportedly agreed to pay $88 per share to acquire Immunomedics in an all-cash transaction, which equates to a 108% premium relative to where the drugmaker's shares closed last Friday. The deal is expected to close in the fourth quarter of 2020, according to the press release.
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So what
The impetus behind Gilead's latest acquisition is Immunomedic's FDA-approved metastatic triple-negative breast cancer (TNBC) drug, Trodelvy. Trodelvy, a cancer-fighting therapy known as an antibody-drug conjugate, is expected to generate approximately $2.3 billion in sales for its initial indication by the middle of the decade.
However, Wall Street thinks the drug's peak sales could eventually top $6 billion if Gilead can successfully tack on other high-value indications to its label down the road. In short, Gilead may be paying as little as 3.5 times Trodelvy's peak sales to acquire Immunomedics, which is a fairly reasonable price tag for a top oncology asset.
Now what
Following this high-dollar oncology acquisition, Gilead probably won't be striking any more major buyout deals any time soon. After all, the blue-chip biotech has already spent a whopping $25.9 billion this year to bolster its cancer portfolio -- through this $21 billion transaction, along with a $4.9 billion deal for the CD47 drugmaker Forty Seven in March. The main thrust of Gilead's long-awaited pivot to oncology therefore appears to be more or less complete at this point.
