ARC-520

Gilead: A Sweet Acquisition Target or a Buyer Itself July 21, 2016 By Mark Terry , BioSpace.com Breaking News Staff At least since March, and probably much longer, investors have been urging Foster City, California-based Gilead Sciences to make an acquisition or two to bolster the company’s value. Which is perhaps a little ironic, given that over the last 15 years the company has gained more than 4,930 percent. But since it’s basically built on hepatitis C and HIV drugs, most analysts think the company needs an acquisition to jumpstart is revenue by branching into new areas or by acquiring companies—or both. Ken Kam , a contributor to Forbes, sat down with Todd Hagopian , who founded a biotech fund, Marketocracy , in March, 2011. He’s averaged 28.12 percent returns ever since, dramatically better than the S&P 500’s 11.87 percent over the same period. In addition to a general discussion about the biotech market, Hagopian provided some interesting thoughts about who might consider buying Gilead, or who Gilead might buy. The biggest revelation is Hagopian’s idea that Merck & Co. should consider buying Gilead. The company hasn’t made any particularly large acquisitions lately, but he thinks they should. “They are suffering from an extremely low growth rate,” Hagopian told Forbes, “and they need to target something dramatic to convince the market they deserve their current valuation levels.” Merck slipped into the hepatitis C market when it acquired Idenix Pharmaceuticals in 2014 for $3.85 billion, but then got stomped on by Gilead. But Hagopian says, “Merck likely got a taste for how longer, and how profitable the market for hepatitis is at this point. By combining their own pipeline with Gilead’s, along with expanding into the hepatitis B market that Gilead is pursuing, this is the type of game-changing acquisition that Merck needs.” He suspects an acquisition of Gilead would require about $150 billion, which would “still be a bargain deal for Merck. Gilead generates over $10 billion per year in free cash flow and is trading at only 6x 2018 earnings, which makes the company one of the best bargains in the biotech field.” On the other hand, if Gilead doesn’t get gobbled up by someone, Hagopian thinks Gilead should buy somebody. Back in March, Bret Jensen , writing for Seeking Alpha, also had a couple suggestions should Gilead open its wallet and go shopping. First up was Berkeley, California’s Dynavax Technologies Corp . The company focuses on infectious diseases, autoimmune and inflammatory diseases, and oncology. It has a market cap of about $650 million, and its HEPLISAV-B vaccine for hepatitis B is expecting approval by the end of this year. Jensen also threw out Kite Pharma , which is based in Santa Monica, California. The company is leading the charge in CAR-T immuno-oncology, although its stock struggled recently when competitor Juno Therapeutics ran into trouble when its own CAR-T trial of JCAR015 was placed on a clinical hold after three patient deaths. Investors were concerned, as they probably should be, that CAR-T therapy isn’t yet ready for prime time and is too dangerous for FDA approval. Kite is actually Hagopian’s first choice for Gilead to buy. He writes, “Due to Juno’s stumble, Kite is poised to be the first CAR-T competitor to the market, potentially years in front of its next competitor, which will allow them to become the Gilead of this particular aggressive new oncology market. Kite would likely cost just over $3 billion to acquire.” Hagopian also brings up Medivation as a potential target for Gilead. Medivation is currently being pursued in a hostile takeover bid by Paris-based Sanofi . Medivation’s prostate cancer drug Xtandi is well on its way to blockbuster status and is of interest to just about any company in the oncology market. But Sanofi isn’t the only company interested. Pfizer , Celgene and possibly AstraZeneca have also shown an interest in Medivation. Jensen also offered up Arrowhead Research Corporation and Achillion Pharmaceuticals as possible Gilead acquisitions. Both focus on infectious disease, and Arrowhead has a hepatitis B drug in a mid-stage pipeline, ARC-520.

April 15, 2016 By Mark Terry , BioSpace.com Breaking News Staff Earlier this week, Arrowhead Pharmaceuticals , located in Pasadena, Calif., announced that it will be making three presentations regarding ARC-520, its experimental treatment for hepatitis B, at The International Liver Congress 2015 in Barcelona, Spain. All of the presentations will show how effective the drug appears to be in clinical trials at treating hepatitis B (HBV). These results gave the company a boost, jumping about 4.04 percent to $6.18 on Thursday. Trading was almost double what it typically is, with 1.16 million shares traded yesterday compared to an average volume of 630,597 shares per day. TheStreet Ratings Team gave the stock a “sell” rating with a score of D. It wrote yesterday, “The company’s weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.” Nonetheless, Arrowhead is considered by many analysts to be an attractive acquisition target for larger companies, such as Gilead Sciences . ARC-250 is the company’s lead candidate and if it makes it to approval, still a ways off, it has the potential to be a blockbuster. Currently it is being tested in several Phase IIb clinical trials. Although there is an effective vaccine for HBV, there is no complete cure, and early data on ARC-250 is suggesting that tantalizing possibility. There are other companies focusing on a cure for the disease as well, including Gilead, Bristol-Myers Squibb , Johnson and Johnson and a small biotech firm, ContraVir Pharmaceuticals . Arrowhead appears to be the leader. In a statement in December, Christopher Anzalone , chief executive officer and president of Arrowhead, said, “We have achieved the highest knockdown ever reported in humans with RNAi and a safety pro continues to be excellent. We are optimistic that this will ultimately translate into powerful clinical outcomes for ARC-520 and follow-on candidates against multiple indications.” For example, an early-stage trial that mixed ARC-520 with Bristol-Myers Squibb’s Baraclude (entecavir), it reduced serum HBV DNA by 99.99 percent. It also showed that a particularly difficult-to-treat negative mutation, HbeAg, when treated with the combination, dropped to a level so low it couldn’t be quantified. If everything went according to plan—and that occasionally happens in the pharmaceutical industry—the drug could be on the market in 2020. Analysts project a potential $4.5 billion in peak annual sales. At the moment, Gilead is the major player in HBV treatments, which would give it a good reason to buy Arrowhead—eliminate a future competitor. Gilead’s two drugs are Hespera and Viread. In 2015, Viread brought in $1.11 billion in sales, a 4.73 percent year-over-year increase, and is projected to bring in $1.12 billion this year. Writing for Bidnessetc, Aliya Kaleem says, “An acquisition at this point becomes all the more important for Gilead if it wishes to maintain its dominance in the high growth HBV treatment market. Moreover, the failure of Gilead’s own HBV product candidates makes Arrowhead even more attractive as an acquisition.” In May 2015, Gilead’s HBV drug candidate, GS-4774, did not meet its mid-stage trial endpoints. Gilead has three HBV drugs in its pipeline, but only one is in the final stages of development.