Gilead finally starts its M&A engine: over $27 billion bet on oncology in 2020

Gilead Sciences got its start fighting viruses. The California drugmaker, with its potent but pricey medicines, changed the treatment landscape for diseases like HIV and hepatitis C, and in doing so joined the ranks of the world's wealthiest biotechnology companies.

In cancer research, however, Gilead has not achieved the same success. For years, it tried to become a force in oncology, but its efforts repeatedly fell short. Meanwhile, sales of several of its core drugs continued to decline, putting enormous pressure on the company and its cancer division.

Strategic Pivot: From Antivirals to Oncology

In 2020, Gilead tried a different path. Under new leadership, the company signed more than six agreements, gaining access to a range of experimental cancer drugs and one approved breast cancer treatment. These deals, together worth over $27 billion, represent Gilead's most substantial push yet to transform itself into a leader in cancer care.

"Gilead's ambition in oncology is very clear," Chief Financial Officer Andrew Dickinson told BioPharma Dive. "What 2020 showed is the concentrated result of that effort."

Setting the Stage: From Cautious to Aggressive

In its 33-year history, Gilead has not been a frequent dealmaker. There have been only a few landmark acquisitions — the 2003 purchase of Triangle Pharmaceuticals solidified its position in HIV treatment, and the 2011 acquisition of Pharmasset secured a hepatitis C drug that would become a blockbuster.

But by 2016, attitudes began to shift. The company's hepatitis C business had peaked, and a sharp decline in sales was imminent. Gilead needed new drugs, and deals were one of the faster ways to get them.

Dickinson joined the company that year as Senior Vice President of Corporate Development, after nearly a decade at Lazard's investment banking arm advising large biotech companies like Celgene and Amgen. He said then-CEO John Mulligan gave "very clear directives" to reshape Gilead's business development strategy.

"We started meeting with venture capitalists," Dickinson said. "We flew with our research teams to Eastern Europe, San Diego, and even around our own backyard, visiting companies everywhere — something Gilead rarely did before."

Gilead had previously dabbled in small biotech deals, most notably its 2011 acquisition of Calistoga Pharmaceuticals and its lymphoma drug Zydelig, hoping to jumpstart its oncology business.

In 2017, Gilead acquired Kite Pharma for $12 billion, its most significant investment in cancer drugs at the time, placing the company at the forefront of the emerging field of engineering immune cells to fight cancer. However, Kite was a long-term investment and did not address Gilead's immediate needs.

New Team and New Strategy

Shortly after the Kite deal, changes extended beyond the deal team. In 2019, Gilead replaced several top executives. In March, Daniel O'Day, former head of Roche Pharmaceuticals, became CEO. Over the following months, Gilead named Merdad Parsey as Chief Medical Officer, Johanna Mercier as Chief Commercial Officer, and Christi Shaw as CEO of Kite. Dickinson became CFO last October, completing the series of leadership changes.

These appointments laid the groundwork for Gilead's renewed push into cancer. O'Day, Parsey, Mercier, and Shaw all had tenures at top oncology companies, bringing development, sales, and management experience in cancer drugs that Gilead previously lacked.

"There were oncology heads before," Dickinson said. "But that person was usually surrounded by a group of people with primarily virology experience. That's not a bad thing, but it's hard to build an oncology business without a management team with deep experience in the field."

Under the new team, Gilead clarified another part of its cancer strategy: instead of pursuing many types of research, it would focus on immuno-oncology — the field of studying how to harness the body's immune cells to fight cancer.

Gilead is not a pioneer in this field: immunotherapy has become one of the hottest areas of research in the industry over the past few years, changing the way many tumor types are treated. However, Gilead is no stranger to the immune system from its virology work, and Dickinson believes the company can use that knowledge as a foundation for cancer drug development.

"You can't be everything to everyone," he said. "In cancer, I think part of the reason we struggled in the past is that we tried to focus on everything."

The 2020 Deal Spree

With the team and strategy in place, Gilead converted the relationships it had built with younger biotech companies over the past few years into deals.

In early March, the company agreed to acquire cancer drug developer Forty Seven for nearly $5 billion.

In May, it paid $375 million to enter a 10-year research collaboration with another biotech, Arcus Biosciences.

By the end of September, the company had made a series of equity investments in Pionyr Therapeutics, Tizona Therapeutics, Tango Therapeutics, and Jounce Therapeutics, totaling nearly $850 million including collaboration fees.

"Frankly, we needed to shore up our pipeline," said Devang Bhuva, Gilead's head of corporate development, who joined the company in April, also from Lazard.

Gilead would soon gain another important cancer drug, as the largest deal in company history was about to happen.

Record Deal: Acquiring Immunomedics

In early 2019, at an industry conference, Dickinson met with representatives from a biotech company called Immunomedics. Since its founding in the early 1980s, Immunomedics had advanced several experimental cancer drugs into clinical trials. At the time of the meeting with Gilead, the company was awaiting FDA approval for its most advanced drug — an engineered antibody for hard-to-treat breast cancer.

Gilead was not the only one interested in Immunomedics. After the FDA approved the company's breast cancer drug (now sold under the brand name Trodelvy) in April of that year, the biotech contacted Gilead and nearly a dozen other pharmaceutical companies seeking a marketing partner. One of them made a counteroffer: an outright acquisition.

Dickinson said the offer caught Gilead off guard, especially given that Immunomedics was set to release more detailed data on Trodelvy just weeks later. Gilead had seen the data early due to collaboration talks and knew it was strong, which could drive up any potential acquisition price.

"We expected to move from collaboration talks to a merger," he said. "But we didn't expect someone to try to do it a week before the company's key data was made public."

If Gilead wanted Immunomedics, it had to move fast. Two days after the initial acquisition offer, Gilead made its own, much larger bid. After negotiations, Immunomedics' board agreed to sell to Gilead for $88 per share, totaling $21 billion.

The deal sparked controversy. Wall Street analysts acknowledged that the high price — more than double Immunomedics' market value the previous week — could deter some investors, especially given that Gilead's 2017 acquisition of Kite had already proven to be overpriced.

Trodelvy was also not a perfect fit for Gilead's strategy, as it is not strictly an immuno-oncology drug. On the other hand, analysts expected Trodelvy to become a blockbuster with annual sales of $1 billion based on its initial approval. If approved for more cancer types, sales could soar.

"This is exactly what we've been waiting for," the Piper Sandler team wrote after the Immunomedics deal was announced.

Trodelvy also gave Gilead a foothold in solid tumors, an area where the company had previously focused mainly on blood cancers. According to Dickinson, Gilead envisions the drug being used in combination with immuno-oncology drugs or targeted therapies, such as the class of PARP inhibitors used to treat prostate, breast, and ovarian cancers.

"Sometimes you have to invest in those smaller pipeline assets, as long as the science is excellent and fits the overall strategy, and then find the bigger pieces around them. Trodelvy is a perfect example," he said.

Gilead's Future

Looking a decade out, Dickinson envisions a more balanced Gilead. Virology will remain a core pillar, but it will share the burden with immuno-oncology and inflammation drugs — an area Gilead entered last year through a $5 billion research deal with Belgian drugmaker Galapagos.

The path to this vision is not smooth. The company has already faced setbacks with the Galapagos deal and continues to face external skepticism about Kite. After spending $27 billion, Gilead has yet to secure a flagship product for its emerging immuno-oncology business like Merck's Keytruda or Bristol Myers Squibb's Opdivo.

Dickinson acknowledges there have been tough lessons. For example, with the Kite deal, Gilead could have better communicated its expectations. But there have also been positive experiences. At Lazard, Dickinson often saw large pharma companies over-manage smaller partners, inadvertently stifling collaboration. Many biotech companies don't want a dominant partner or acquisition offer. To avoid this mistake, Gilead has been more open to unconventional deal structures, which led to the alliance with Galapagos and equity investments in Tizona and Pionyr.

Dickinson says the resulting approach is still unique to Gilead. It will continue to be showcased, as the company still has about $11 billion on hand for further acquisitions.

Investors, however, are not entirely convinced. Despite the flurry of deals, Gilead's stock fell last month to its lowest level since 2013.