Fuse It Or Lose It


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What's going on?

Gilead Sciences agreed to buy Immunomedics for $21 billion over the weekend in hopes they’ll combine their DNA to become the nucleus of the pharma industry.

What does this mean?

Gilead said it’d be borrowing $6 billion to help fund the purchase, and it’s easy to see why: the drugmaker is paying more than double Immunomedics’ pre-deal market value, which has already surged since the US approved its promising new breast cancer treatment earlier this year.

Gilead might be hoping the medication will eventually be approved for use in fighting other cancers too. And the company could certainly do with a big win: its sales fell 10% in the second quarter as pandemic-driven disruptions cut demand for some of its drugs. A bigger share of the $200 billion oncology market could be just what the doctor ordered…

Why should I care?

For markets: Bi(o)t(e)ch, please.
Immunomedics’ hefty sale price just goes to show how much investors in biotech firms can make if everything runs smoothly. But investing in the companies behind untested treatments is inherently risky: more than 85% of new drugs will fail on the way to winning approval, and the average journey from concept to creation takes a blistering 12 years. Those are the kind of stats that might make you think twice before investing…

The bigger picture: There’s always a longer name. 
You only need to look at clumsy compound names like GlaxoSmithKline and Bristol Myers Squibb to see the pharma industry’s big into mergers. In fact, the Immunomedics deal comes just three months after Gilead was itself reported to be the target of pharma giant AstraZeneca (another merged company created in 1999 by Sweden’s Astra and Britain’s Zeneca). By bulking up, Gilead might be hoping to ward off those pesky suitors – for a little while, at least.

Originally posted as part of the Finimize daily email.

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