Canaccord Genuity Downgrades Kite Pharma to Hold vs Buy After Deal to Be Bought by Gilead

Canaccord Genuity downgraded Kite Pharma (KITE) to hold from buy and raised its price target on the stock to $180 from $120 after the company agreed to be acquired by Gilead Sciences (GILD).

“We do not expect Gilead to acquire Amgen’s (AMGN) rights for Kite’s CART technology for specific targets given Gilead’s comments on the call specifically regarding solid tumors,” Canaccord analyst John Newman said. “However, Gilead may choose to restructure the agreement to exclude specific targets for long-term R&D in solid tumors.”

“We believe Gilead will move aggressively to retain Kite employees, especially those in cell manufacturing, given manufacturing will be absolutely key for the axi-cel launch, and life of the product. Also, competitors including Novartis (NVS) and Juno (JUNO) may look to pull away key Kite employees ahead of potential [Food and Drug Administration] approval by YE17.”

Finally, Canaccord said it would expect Gilead to stay with Kite’s initial launch plan in terms of number of centers at launch and pace of adding new centers by 2018, even if FDA approves the product early in September or October 2017.

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