Gilead doesn't buy Intercept

At least now we can be certain of one thing: Gilead is interested in non-alcoholic steatohepatitis. Its move yesterday to buy Nimbus Therapeutics’ ACC inhibitor programme gives it four NASH projects with four separate mechanisms of action, and only one of these assets is derived from its own laboratories.

One question for NASH followers is why Gilead is cautiously sniffing out private acquisition targets rather than buying a listed player with a bullish investor following, like Intercept or Genfit. And, though Gilead’s interest must be good for the space in general, the fact that these listed entities remain solo gives pause for thought.

Intercept and Genfit investors took contrasting views of the situation yesterday, the former closing up 2%, while the latter fell 3% and was off another 4% in early trading today. Intercept’s obeticholic acid, of course, was what set off the NASH craze and turned Intercept into a multibillion-dollar company two years ago.

NASH presence

Back then Gilead already had a NASH presence thanks to GS-4997, an in-house apoptosis signal-regulating kinase-1 inhibitor, and simtuzumab, an asset it got with its 2010 acquisition of Arresto Biosciences, a private biotech with an initial focus in idiopathic pulmonary fibrosis and cancer.

Yesterday’s $400m purchase of Nimbus Therapeutics’ ACC (acetyl-CoA carboxylase) inhibitor NDI-010976 adds another string to Gilead’s bow. ACC is an enzyme involved in fatty acid metabolism, and phase I NASH data with NDI-010976 are to be presented at the EASL meeting next month; Gilead stands to pay Nimbus up to $800m more as NDI-010976 progresses through development.

Nimbus was founded by Atlas Ventures seven years ago, and in subsequent financing rounds added Lilly Ventures, SR One, Pfizer Ventures and Lightstone Ventures as investors. In a statement yesterday, Atlas’s partner Bruce Booth highlighted the VC group’s ability effectively to sell “the egg” (one asset, NDI-010976) without having to sell “the goose” – Nimbus itself.

Thus, while Gilead is being relatively restrained on the one hand, shelling out $400m on a single phase I asset is not exactly underpaying. A year ago the group had bought yet another private NASH player, Phenex Pharmaceuticals, for its farnesoid X receptor agents (Gilead puts small deposit down to snare NASH properties, January 7, 2015).

Given its appetite Gilead must surely have taken a look at some publicly listed NASH players too.

In fact Intercept stock spiked in February on takeover rumours. Thus the fact that Intercept has not been acquired could mean that its owners are holding out for a much higher price, which if realistic would clearly be welcomed by investors, or that Gilead has spotted something that it does not like – clearly a more worrying scenario.

Another factor is the US advisory panel set to review Intercept’s application to sell obeticholic acid for primary biliary cirrhosis, a much rarer condition than NASH, this Thursday. For Intercept to have sold just before this adcom would likely have required a knockout price.

Interestingly, two smaller NASH players – Conatus and Galmed – also reacted positively to Gilead’s move yesterday, closing up 9% and 6% respectively.

Those betting on Gilead stepping up M&A activity will correctly point to its cash balance – an incredible $26bn at the end of last year – and the flop of its first oncology drug, Zydelig. For now, however, it looks like the group is set to remain a relatively cautious acquirer.