Gilead Sciences, which finished 2019 with nearly $26 billion at its disposal, is putting some of that money to work with a $4.9 billion deal to acquire cancer immunotherapy developer Forty Seven.
Under deal terms announced Monday, Foster City, CA-based Gilead (NASDAQ: GILD) will pay $95.50 for each share of Forty Seven (NASDAQ: FTSV). That’s a more than 64 percent premium to the company’s closing stock price last Friday. When Menlo Park, CA-based Forty Seven went public in 2018, it priced its shares at $16 each.
Forty Seven emerged in 2016 with Stanford University research about a signaling molecule called CD47 and funding from the California Institute for Regenerative Medicine. The company takes its name from CD47, which is overexpressed on cancer cells and is the target of its drugs. This molecule keeps macrophages, a type of immune cell, from swallowing them by sending out a “don’t eat me” signal, the company says in its securities filings. Blocking CD47 is intended allow macrophages to respond to the “eat me” signals, clearing the way for these immune cells to swallow and digest cancer cells, the company says. The company’s lead CD47-blocking drug, an antibody called magrolimab, also engages with a receptor on the macrophage, providing an additional “eat me” signal, the company adds.
Magrolimab is being tested in combination with chemotherapy in separate studies evaluating it as a treatment for two types of blood cancer: a group of disorders called myelodysplastic syndromes (MDS) and acute myeloid leukemia (AML). At the American Society of Hematology’s annual meeting last December, Forty Seven reported updated Phase 1b data showing that in MDS, the drug combination led to an overall response rate—either a partial or a complete response to therapy—of 92 percent. The complete response rate to the drug combination was 50 percent. In AML, the overall response rate was 64 percent; the complete response rate was 55 percent. Forty Seven reported that the treatment was well tolerated by patients, with no increase in toxic effects compared to chemotherapy alone.
The data reported at ASH caught Gilead’s eye. Speaking on a conference call Monday, Gilead CEO Daniel O’Day said that both AML and MDS have a high unmet need. As a cancer treatment that is not a cell therapy, Forty Seven’s assets complement the cell therapy franchise that Gilead added with its 2017 acquisition of Kite Pharma, he added.
The Forty Seven drug is being developed for additional cancers including non-Hodgkin lymphoma and diffuse B-cell lymphoma. O’Day noted that the drug’s mechanism of action could also apply to solid tumors, and the therapy has the potential to be part of drug combinations with other therapies.
“This is in the sweet spot, I think, of what you need to do to be successful in oncology,” O’Day said. “We will not be afraid to invest as we see data and as we see signals in the data to move fast and be first with combinations with this molecule.”
Other companies are also developing therapies that target CD47. Forty Seven’s competitors include Trillium Therapeutics (NASDAQ: TRIL), ALX Oncology, Arch Oncology, and Novimmune.
Gilead reported that it ended 2019 with $25.8 billion in cash and marketable debt securities. When the company released its 2019 fourth quarter and full year financial results last month, O’Day announced a goal to introduce 10 “transformative medicines” in the next 10 years. Reaching that goal would require partnerships and small-to-medium-sized acquisitions. Gilead characterizes the Forty Seven acquisition as a medium-sized deal. O’Day said Gilead is looking to acquire other companies that have clinical-stage assets supported by strong science.
The Forty Seven acquisition has been approved by the boards of directors of both companies. Gilead expects to complete the deal in the second quarter. Forty Seven has agreed to a “no shop” provision that bars the company from pursuing another offer, according to a securities filing. But under certain circumstances, Forty Seven may provide information to and speak with another party that has submitted an acquisition proposal that its board deems a superior offer, according to the merger agreement. These steps would be taken to comply with the board’s fiduciary duty to shareholders. If Forty Seven accepts a better offer, the merger agreement with Gilead requires it pay the larger company a $160 million termination fee.
Image: iStock/Andrei Stanescu