Gilead starts 2017 by snatching Novartis cancer specialist; a harbinger of early (and ferocious) M&A?

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Gilead Sciences Inc. (Foster City CA) has poached a top cancer specialist from Swiss drugmaker Novartis AG (Basel) as the US healthcare group sharpens its focus on oncology. Alessandro Riva will become a Gilead senior vice president and head of its hematology and oncology therapeutic area, the US company announced late on Tuesday.

@GileadSciences has poached a top cancer specialist, Alessandro Riva, from @Novartis Click To Tweet

Riva hails from Novartis Oncology, where he was global head of oncology development, says Reuters. He was responsible for developing more than 20 cancer compounds, including targeted and immune-oncology therapies.

He also oversaw regulatory approvals of new medicines in both solid and hematological malignancies, Gilead said.

During his 12-year tenure at Novartis, Riva was involved in several worldwide drug approvals, it said.

“I have always admired Gilead for its scientific focus and data-driven approach to drug development,” Riva said in a statement.

Novartis shares were down 4% at $69.74 in New York, while Gilead jumped 6% to $76.03.

Steve’s Take:

It certainly didn’t take long for Gilead to burst out of the New-Year blocks with an announcement (alright, unofficial tip) to the world that it’s planning to expand—BIG TIME—into another lucrative corner of specialty medicines.

With its pipeline bogged down in safety issues and other problematic data, and analysts insisting on a rational, strategic vision to offset the inevitable, competitive response to its monster hep C monopoly, Gilead managed to steal one of the big guns in oncology drug development to head up its cancer R&D push.

Allessandro Riva is swapping his Big Pharma hat at Novartis for new digs in Big Biotech, which John Carroll at Endpoints duly notes has been clobbered by disappointed analysts this past year.

The move appears to signal that Gilead isn’t content to simply roll with its residual R&D oncology pipeline. Instead, the hiring of a chief of hematology-oncology from Big Pharma makes it look as though it wants to be an actual “player” in oncology.

In the can­cer field, Gilead was forced to halt a lineup of 6 stud­ies for Zy­delig in the spring of 2016 due to safety is­sues. And that came after the drug was clearly los­ing a race with Im­bru­vica from J&J and Ab­b­Vie for leukemia and lym­phoma.

Ab­b­Vie and Roche’s vene­to­clax, mean­while, is ex­pected to gain mar­ket ground in CLL (chronic lymphocytic leukemia). Then in No­vem­ber came sub­par data for momelo­tinib, which has been strug­gling to dis­tin­guish it­self from Incyte’s Jakafi for myelofi­boris.

Clin­i­cal set­backs, though, are all the rage at Gilead, Carroll notes, which has been rack­ing up fail­ures through­out 2016, in­clud­ing four straight bombs late in the year.

What Gilead does have is cash, and tons of it. Riva may have less to do in the clinic right now than at the deal table, where Gilead may yet spend a sig­nif­i­cant amount of its cash re­serves on M&A and li­cens­ing. Gilead clearly needs to do more in on­col­ogy/hema­tol­ogy.

Brian Abra­hams at Jef­feries thinks that could be the case. He noted:

“We be­lieve the rel­a­tively high-pro­file heme/onc chief hire sig­nals an in­creas­ing focus in on­col­ogy, a wel­come de­vel­op­ment, and ex­pect Gilead to more ag­gres­sively pur­sue BD (business development) to build out a broader can­cer pipeline–some­thing not sub­stan­tially baked into most ex­pec­ta­tions but which we be­lieve could help im­prove sen­ti­ment around the name and LT rev­enue prospects. We ex­pect spec­u­lated small to mid-cap M&A can­di­dates like Incyte could also trade up on this an­nounce­ment.”

Well, that’s making a call we can all wrap our heads around. Indeed, Incyte might just fit Gilead’s strategic acquisition plan (assuming it has one); and numerous smaller companies are easily affordable to create a strong “string of pearls” oncology division, as DoctorRx at Seeking Alpha puts it.

While there’s been some prattle about something possibly happening with Gilead’s oncology franchise, it still surprises many of us that a high-powered senior executive with Novartis Oncology–a Star, if you will– has signed on to a relatively small position as head of hematology and oncology at Gilead.

Prior to joining Novartis, Dr. Riva co-founded the Breast Cancer International Research Group (BIRG) and Cancer International Research Group (CIRG), for which he served as CEO and CMO. During his career, Alessandro has authored or co-authored more than 100 oncology research manuscripts and abstracts.

So this is a very accomplished, capable chap. When Herve Hoppenot left Novartis Oncology to head up Incyte, Dr. Riva was temporary president of this important Novartis division.

Meanwhile, there are two seminal questions, the answers to which seem to point to the supposition that one or more acquisition targets are in play now at Gilead. First, why would Dr. Riva join this backwoods of hematology-oncology research. The related question is why Gilead in all likelihood offered him a deal for his abilities that he couldn’t refuse.

Answer? Gilead has a large effort in oncology, and the hematology part of such effort looks shaky, both as discussed above and based on some other previous disappointments.

It’s not hopeless, but if idelalisib is too toxic for frontline use, where does the big blockbuster success come from? For a small market cap company, one might view things differently, but given Gilead’s colossal market cap, so far, its oncology effort hasn’t produced diddly.

There’s no telling what public and private companies Gilead and Dr. Riva might have discussed in building a string of pearls strategy in oncology. While prices are hardly bargain basement, Gilead may finally want to go this route. Four CAR-T companies, or companies in similar fields, have a combined market cap of only $5 billion. They are:

Kite (NASDAQ:KITE)

Juno (NASDAQ:JUNO)

Cellectis (NASDAQ:CLLS)

NantKwest (NASDAQ:NK)

Bottom line: responsibility for improving the fortunes of the unit will now fall on Dr. Riva, FiercePharma points out. On Riva’s watch, Novartis wrapped up a pivotal trial of CDK 4/6 drug LEE011 early, took a CAR-T program to the cusp of FDA approval and secured regulatory passes for products including Farydak, Odomzo and Zykadia.

Perhaps as importantly, given doubts about the strength of Gilead’s cancer pipeline, the Novartis oncology unit wheeled and dealt during Riva’s stint at the helm, although it has been most active in adding preclinical assets. In recent years Novartis has augmented its pipeline by inking deals with biotechs including Surface Oncology, Xencor and Xoma.

Gilead shares surged 6% to $76.03 on this news. It remains in its downtrend, though, having hit $80 intra-day right after the election. The actual process of either bidding for Incyte, following a string of pearls strategy, or executing some other strategy that would utilize Dr. Riva’s talents to their fullest can take time and is not guaranteed to have a lasting positive effect on Gilead’s share price.

As far as Novartis is concerned, other people will need to step up and fill Dr. Riva’s shoes. The Swiss giant has faced upheaval of its own over the past 12 months. The folding of the cell- and gene-therapy team into the larger oncology group saw 120 people–including unit head Usman Azam–leave the company. And in September Novartis Oncology veteran Hugh O’Dowd left the company to take up the CEO post at Neon Therapeutics.

Then Wednesday, Greek officials announced that they are investigating Novartis for bribery in the wake of local media reports raising questions about the company. It is the fourth set of bribery allegations against the Swiss drugmaker to go public in the past year.

Unlike companies such as Gilead that are growth-minded and actually making moves, Novartis still is a puzzle with its tread-water philosophy, continuing, for example, to dither about its possible acquisition of generics drugmaker Amneal months ago. (Rumor has it that an insider at Novartis says it’s a done deal, but not worth $9 billion. There’s no stock play because Amneal is privately held.)

All of the foregoing commentary, with its speculation about corporate motives and the timing of potential M&A, can’t possibly be predicted accurately. Trends, on the other hand, are founded on good ole-fashioned data.

Steve's Take: Expect many more M&A deals in the #NewYear Click To Tweet

And Allergan’s surprise buy of LifeCell just before Christmas, and now this opening move by Gilead, essentially putting its cards on the table this early, well, I smell deals. Lots of deals. And someone who loves dealmaking is about to become our new Commander-in-Chief.

Me thinks it’s time to go shopping.