Incyte (INCY) Seen Back of Gilead's (GILD) Takeover Target List Following Disappointing Momelotinib Data - Leerink

November 17, 2016 8:24 AM EST
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Leerink Partners analyst Geoffrey Porges says Incyte (NASDAQ: INCY) is back on the list of Gilead Sciences' (NASDAQ: GILD) takeover targets after Gilead's disappointing phase III data for their JAK 1/2 inhibitor momelotinib in myelofibrosis.

"One consequence of this disappointment, however, is that it does restore INCY to the list of feasible candidates for acquisition by Gilead, since they would no longer face the obligation to divest one of the overlapping JAK programs," Porges said.

He added, "Investors have been expecting significant M&A from Gilead for the better part of 18 months, and the company’s balance sheet is being strengthened with significant cash accumulation in recent periods. GILD has failed to pull the trigger on a material transaction despite peak and then declining revenue and earnings and meaningful multiple compression. INCY has previously been suggested as an acquisition candidate, but had been discounted due to the overlap between Jakafi and momelotinib, and also filgotinib and baricitinib. Now that momelotinib is clearly inferior to Jakafi, there is unlikely to be a significant negative impact from discontinuing or divesting momelotinib if management decided to commit to an INCY acquisition. The combined company would still have an overlap between their other JAK’s filgotinib and baricitinib, but INCY has only a passive role in the development and commercialization of baricitinib, so the value of the two assets would likely still be able to be maintained in the combined company. Otherwise, INCY's portfolio of oncology molecules looks to be additive and complementary to Gilead’s existing portfolio and programs."

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