Gilead Sciences agreed to buy Kite Pharma in a $11.9 billion deal on Monday, as it looks to fuel growth with an emerging class of cancer immunotherapies that are expected to generate billions.
Gilead will pay $180 per share in an all-cash deal, representing a 29.4 percent premium over Kite's Friday close. Kite's shares were trading up at $178.15 before the bell.
Santa Monica, California-based Kite is developing a CAR-T, or chimeric antigen receptor T-cell therapy, which harnesses the body's own immune cells to recognize and attack malignant cells.
Gilead's growth has been fueled by its pricey but revolutionary hepatitis C drugs but with fewer eligible patients and rising competition, sales have begun to fall.
Second-quarter sales of its hepatitis C drugs — Sovaldi, Harvoni and Epclusa — totaled $2.9 billion, down from $4 billion a year earlier.
Wall Street and Gilead shareholders have long been expecting Gilead to use its cash pile for a big-ticket acquisition.
The deal for Kite, which has been approved by the boards of both companies, is expected to close in the fourth quarter.
Kite is one of the leading players in the emerging field of CAR-T, and is competing with rivals Novartis, Juno Therapeutics, and Bluebird bio in a race to get the first approved therapy.
If approved, these drugs are expected to cost up to $500,000 and generate billions of dollars. Success would also help advance a cancer-fighting technique that scientists have been trying to perfect for decades.
The U.S. Food and Drug Administration (FDA) is expected to decide by Nov. 29 whether to approve Kite's CAR-T, axi-cel, for treatment of adults with advanced lymphoma.
Gilead has a market value of $96.36 billion, according to Thomson Reuters data. The company was once the world's largest maker of HIV drugs, and in 2011 agreed to acquire hep C drug developer Pharmasset for $11 billion.
Last year, Gilead generated total sales of $30.39 billion, of which $14.8 billion came from hep C treatments.
Bank of America/Merrill Lynch and Lazard are acting as financial advisers to Gilead, while Centerview Partners is Kite's exclusive financial adviser.
Skadden, Arps, Slate, Meagher & Flom is the legal counsel to Gilead and Sullivan & Cromwell and Cooley for Kite.
The Wall Street Journal reported first reported the deal.
Gilead's shares were little changed in premarket trading, while Juno's shares rose nearly 14 percent and Bluebird's 2.6 percent.