Reuters
- Arcus Biosciences spiked as much as 99% in Thursday’s session after Bloomberg reported Gilead is in talks to invest in the company.
- Gilead is likely interested in Arcus’ AB154 therapy, a type of anti-TIGIT medicine that uses the immune system to fight tumors, analysts at Cantor Fitzgerald wrote in a note.
- The anti-TIGIT segment could bring in $10 billion in annual sales at its peak, Bloomberg reported, citing Citigroup analysts.
- The biggest question now is whether Gilead will merely invest in Alphabet-backed Arcus or buy the company outright, Cantor Fitzgerald said.
- Watch Arcus Biosciences trade live here.
Shares of cancer drug developer Arcus Biosciences skyrocketed as much as 99% in Thursday trading after Bloomberg reported biotech firm Gilead may buy a stake in the company.
Alphabet owns the largest stake in Arcus, and the tech giant is in talks with Gilead about potential partnerships and investing in the smaller biotech firm, according to Bloomberg.
Among Arcus’ most promising products is an experimental treatment known as AB154, a type of medicine called anti-TIGIT, which uses the immune system to attack tumors. The therapy is likely Gilead’s primary interest as the firm looks to new assets in the oncology space, analysts at Cantor Fitzgerald said in a Wednesday note.
“Yes, we think GILD is likely interested, as we think that anti-TIGIT could be a novel backbone in [immuno-oncology] treatment,” the team of analysts led by Alethia Young wrote.
Citigroup analysts led by Mohit Bansal said the AB154 therapy belongs to a category of treatments that could fuel $10 billion in annual sales, Bloomberg reported.
Cantor Fitzgerald also pointed to competition looming from rival biotech giant Roche. Bullish commentary around Roche’s own anti-TIGIT therapy could lead Gilead to rush its entry into the promising segment, the analysts said.
The bigger question now is whether Gilead will buy a stake in Arcus or acquire the firm outright. Arcus’ pipeline makes it an attractive buyout option for several larger companies, and its pre-spike valuation of $700 million would be a “fairly small deal” for Gilead, the analysts said.
“We think Arcus’s portfolio is broad enough, with both small molecules and antibodies that GILD doesn’t have, that an acquisition is likely,” they added.
Arcus traded at $28.63 per share as of 3 p.m. ET Thursday, up about 184% year-to-date.
Cantor Fitzgerald rated Arcus “overweight,” with a price target of $21 per share.
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