Gilead Sciences’ Takeover of Kite Pharma Could Allow Company to ‘Fly Higher,’ BMO Says

Gilead Sciences’ (GILD) acquisition of Kite Pharma (KITE) for $11.9 billion could allow the company to get to break-even faster and could also pave the way for new deals, BMO Capital said in a note to clients.

“The acquisition provides much needed expertise in oncology, which we expect Gilead to leverage,” BMO Capital said. “We therefore expect an increase in the pace of product licensing deals within oncology going forward and for platform deals to focus on antibody and gene editing, which should be less expensive.”

This, BMO said, leaves room for another late stage acquisition, which could be partner Galapagos (GLPG), following expiration of standstill, seen around 2018, or Intercept Pharmaceuticals (ICPT), if Gilead’s FXR agonist falls short in ongoing phase 2 trials in primary biliary cirrhosis, primary sclerosing cholangitis and nonalcoholic steatohepatitis. Data on those are expected between Q4 of 2017 and Q1 of 2018.

BMO said its M&A model implies potential accretion from the deal by 2019 with inflection to earnings per share accretion around 2024.