Street Puts Stamp Of Approval On Gilead's Kite Pharma Takeover

The initial reaction from Wall Street analysts following Gilead Sciences, Inc. (NASDAQ: GILD)’s nearly $12 billion buyout of Kite Pharma Inc (NASDAQ: KITE) was mostly bullish, although price targets and ratings on Gilead are a mixed bag on Wall Street. However, this week’s trading action suggests the market has made up its mind about the deal and has given its seal of approval.

Following the announcement of the deal, Gilead shares initially demonstrated a muted reaction Monday, rising just 1.2 percent on the day. The stock picked up steam in the days that followed as investors dug into the details of the deal and began to understand its potential long-term growth implications.

Thursday morning’s 2-percent gain puts Gilead shares up more than 12 percent this week. The Kite acquisition may be just what the company needs to ease investor fears about growth avenues in the years ahead.

Ironically, Gilead’s largest success in recent years has been the biggest thorn in its side as well. Gilead essentially cured Hepatitis C with its revolutionary treatments. However, with Gilead’s treatments so effective that they are wiping out the disease, the company is losing customers by the day.

“Perhaps the awful, brutally honest lesson here is: curing disease is great for patients but sucks for business,” journalist Adam Feuerstein tweeted after Gilead guided or up to a 50-percent decline in hepatitis C drug sales in 2017.

Related Link: Analysts Weigh In On Gilead-Kite Pharma Deal

Prior to the Kite deal, Gilead shares had drifted mostly sideways in 2017 as investors pondered the company’s next big growth source. This week’s trading action suggests the market sees Kite and its CAR-T cancer business filling a major hole left by Gilead’s maturing hepatitis business.

Joel Elconin contributed to this story.