Kite Pharma (KITE 179.55, +40.40) has surged 29.0% to a fresh all-time record after agreeing to be acquired by Gilead Sciences (GILD 74.70, +0.91) for $180 per share or $11.90 billion in cash.
The acquisition price represents a 29.4% premium to Kite's closing price from Friday. The acquisition, which is expected to be completed in the fourth quarter, is aimed at diversification of Gilead's revenues. This should help, considering Gilead has seen a slowdown in sales of its top products. The acquisition is expected to be neutral to Gilead's earnings by year three and accretive to earnings thereafter.
Gilead Sciences specializes in the development of biopharmaceuticals in areas of unmet medical need while Kite develops cancer immunotherapies that use the patient's own immune cells to fight cancer with an aim of providing long-term and durable response.
The two companies believe the combination will lead to a build-up of infrastructure in Europe, where one of Kite's treatments is expected to be approved in the next few months. In addition, Kite's most advanced therapy candidate—axicabtagene ciloleucel—is currently under priority review by the FDA with a regulatory update expected on November 29.
Kite's expertise will position Gilead among the leaders in Oncology and cell therapy while Gilead's core capabilities should support the manufacture of Kite's products. It is expected that development times will shorten thanks to the combination.