Gilead's Competition: Other Stocks To Watch In Immunotherapy

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Includes: GILD, INCY, KITE, MRK, NVS, ROG
by: David Butler

Summary

Gilead's buyout of Kite Pharma is huge.

That said, there are others with equal traction in oncology.

Novartis' recently gained FDA approval for its CAR-T treatments, while companies like RocheHolding AG look to benefit from treating some of the side effects of this new type of medicine.

Gilead’s Competition: 2 other stocks to watch in Immunotherapy

The acquisition has caused more buzz in a week than most stocks create in a year. Gilead Sciences’ (GILD) nearly $12 billion takeover of Kite Pharma Inc. (KITE) puts Gilead at the forefront of oncology treatments. Obviously the main target is Kite’s gene therapy axi-cel treatment; but Kite also offers a lot in terms of research and their pipeline. That said, there is direct competition with Kite’s gene therapy that Gilead is paying so much for. There are also stocks like Novartis (NVS) to consider that compliment these new immunotherapy techniques.

Novartis has immunotherapy cancer treatments that are ahead of Gilead/Kite in terms of approvals. While it certainly won’t stop Gilead from getting into the market, this represents a clear price competitor (good for consumers, bad for earnings potential), and an ensuing battle for market share.

Novartis’ CAR-T gene therapy treatment for types of leukemia was approved by the FDA yesterday. This puts Novartis ahead of Gilead, and creates a substitute good (econ 101). The concept is exactly the same; take someone’s own T-Cells and reengineer them to fight cancer like Muhammad Ali. It is the stuff of science fiction, but it’s happening. Kymriah, as it’s called, has been approved for people up to the age of 25 for the treatment of acute lymphoblastic leukemia. Let me save you the time of looking it up. It is plain old awful; and you should pray that no one you know ever has it. That said, these developing treatments seem to be offering hope where there used to be no chance at all.

With their treatment expected to begin around $475,000, Novartis has set the battle line for Gilead. They’re also operating on a “priced for results” idea. Now we know what Gilead will be dealing with. While Kite Pharma’s treatment may vary in terms of beginning audience, I highly doubt long term that Gilead will be able to price above Novartis and gain any market share. Of course, all of this stands on the assumption that both companies treatment plans are of equal quality.

There are drawbacks with everything, and this is no different. There are pretty harrowing side of effects of gene therapy from Kite Pharma or Novartis treatments. It makes sense when you think about it. Having your cells removed, essentially pumped full of steroids, and then put back into your body wouldn’t sit well. Those receiving the treatment have experienced heavy fevers, and wild flu like symptoms. These are the result of a condition called cytokine release syndrome. As my non medical brain understands it; your body flips out from the super charged cells running around your body killing cancer.

This is an inherent problem that will need to be addressed if immunotherapy is the way of the future for oncology. Enter Roche Holding AG (ROG). The firms’ Actemra has been approved for use as a treatment for the side effects induced by Car-T treatment plans in oncology. In other words, Roche just got a piece of the pie indirectly. If the market for these immunotherapy treatments grows, I would pay attention to Roche stock, and particularly Actemra sales trends.

Immunotherapy is definitely the way of the future. That said, I would contend that those expecting Gilead Sciences to corner the market like they did with Sovaldi are sorely mistaken. There are multiple players developing oncology treatments using immunotherapy. Incyte (INCY) and Merck (MRK) are doing research in immunotherapy for various cancers. The market will be divided up from the very beginning, as it probably should be.

I’m not saying that this in any way will stop Gilead Sciences from making money from oncology; but I do think investors should keep perspective. Novartis seems to be setting market price and approach; and Gilead will be forced to follow it if they want to compete. Simply put, there are many avenues to consider in terms of investing in this new medical world. Gilead Sciences is not the only option.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.