Did Gilead Sciences Just Give Wall Street a Huge Head Fake?

Source: Gilead

In mid-2014, Gilead Sciences scored three regulatory approvals for its PI3k inhibitor Zydelig in the blood cancer space, marking the company's entry into the high growth oncology market. Since then, the biotech has launched additional trials for Zydelig in the blood cancer arena, and initiated studies for several other experimental compounds aimed at a broad range of hematological malignancies, such as its Syk inhibitor Entosplentibib and its BTK inhibitor GS-4059, among others.

Gilead thus appears to be extremely interested in building a hematology franchise around the blockbuster-in-waiting Zydelig. Given that this market was already valued at $24 billion last year according to EvaluatePharma and there is ample room for additional therapies in light of the high unmet medical need, this seems like a wise move.

Source: EvaluatePharma

But when analysts questioned Gilead's management during the company's second-quarter conference call about potential buyout targets in the oncology space, they gave some rather curious answers related to hematology. Specifically, Gilead'sCOO John Milligan stated that:

This statement obviously begs the question, "is blood cancer now too crowded?", or alternatively, is Gilead being coy to hide its real intentions on the M&A front? With this in mind, let's take a deeper look at some of the major developments in the hematology space, and consider whether Gilead just gave Wall Street a major head fake.

Is the blood cancer market too crowded?Getting the ball rolling, Ariad Pharmaceuticals' Iclusig gained two regulatory approvals for adults with chronic myeloid leukemia (CML) and Philadelphia chromosome-positive acute lymphoblastic leukemia (Ph+ ALL) back in late 2011, but the drug's label has since been severely restricted in the U.S. because of blood-clotting issues, making it a drug of last resort in most cases.

Celgene, of course, has continued to expand Revlimid's label over the years with a recent approval in newly diagnosed multiple myeloma.What's really turned heads, however, is the biotech's attempt to further expand itsfootprint in the hematology space via a milestone-driven partnership withJuno Therapeutics. The partnership will see the two companiesexplore the use of CAR-T and TCRs in a variety of malignancies, with a heavy emphasis on blood-based cancers. That said, Juno's platform is far from a proven entity, and these T-cell based therapies, in general, have a nasty history of producing serious adverse events that have greatly slowed their development -- which is probably why Celgene didn't simply buy the company lock, stock, and barrel.

AbbVierecently bought Pharmacyclics for its BTK-inhibitor Imbruvica, which is already approved for several B-cell malignancies. This drug is expected to garner several additional approvals in the blood cancer realm by 2020, making it one of the most important new hematology drugs on the scene at present. In addition, AbbVie is rapidly pushing ABT-199 toward a regulatory filing forchronic lymphocytic leukemia, which could be a major new drug for this disease, depending on the results of its ongoing late-stage trial.

Geron and Johnson & Johnson inked a huge licensing deal for the latter's telomerase inhibitor imetelstat a few months back; imetelstat is presently entering two midstage trials for myelofibrosis and myelodysplastic syndromes as a potential later-line treatment for these diseases. While imetelstat's proof-of-concept studies produced some unprecedented results in terms of efficacy, the drug's toxicity profile is worrisome, and there's no guarantee these early results will be replicated in the forthcoming mid-stage trials.

Kite Pharma is in the throes of launching several pivotal trials for its lead hematology therapies CD19 and KTE-C19, and is exploring additional therapeutic targets via a recent partnership with Amgen. But again, Kite's CAR-T approach may ultimately suffer from problems similar to those its peers have experienced.

Adaptimmune Therapeutics, Bellicum Pharmaceuticals, Cellectis,and Ziopharm Oncology all have pre-clinical and early stage CAR-T/TCR assets aimed at the hematology market, but none are exactly a sure thing due to their present stages of development.

Is Gilead really going to shy away from acquiring a promising hematology company?The Street is fascinated by Gilead's massive cash position, which exceeds $14 billion at last count. Simply put, the biotech is fully expected to be on the hunt for a mid to large sized acquisition. In fact, most industry insiders believe the biotech will favor targets in oncology, and potentially boost its fledgling presence in the niche-based hematology space.

That's why it's intriguing that management stated that hematology is now getting "crowded". After all, a look across the blood cancer landscape suggests that the vast majority of potential competition comes fromexperimental therapies with poor safety track records. Besides Revlimid and Imbruvica, however, there is little in the way of approved therapies that have proven to be effective across a diverse range of blood disorders. So, yes, Gilead does appears to have just given Wall Street a huge head fake about its real M&A intentions.

The article Did Gilead Sciences Just Give Wall Street a Huge Head Fake? originally appeared on Fool.com.

George Budwell owns shares of AbbVie and Gilead Sciences. The Motley Fool recommends Celgene, Gilead Sciences, and Johnson & Johnson. The Motley Fool owns shares of Celgene and Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.