CymaBay stock rocketed more than 25% Monday after Gilead Sciences said it would snap up the liver disease drugmaker for $4.3 billion.
The smaller company is working on a treatment for a liver disease known as primary biliary cholangitis, or PBC. Recent studies suggest CymaBay's seladelpar could improve the hallmark itching associated with the disease. Gilead says the acquisition will complement its existing portfolio of liver disease treatments, which includes hepatitis B and C drugs.
Gilead's acquisition news came in lockstep with an announcement from CymaBay that the Food and Drug Administration has accepted its application for approval of seladelpar. The agency will perform a speedy review of the drug and make an approval decision by Aug. 14.
RBC Capital Markets analyst Brian Abrahams notes that, for Gilead, the deal "bolts on a quality synergistic liver asset, but at a high premium." The market opportunity for seladelpar is roughly $650 million a year, he estimated. Gilead is paying 6.6 times the optimal peak sales estimate.
On today's stock market, CymaBay stock surged 25.4% to 32.21. The deal values shares at $32.50 apiece. Gilead stock rose 1.1% to 74.45.
CymaBay Stock: Following Ocaliva
If approved, CymaBay will hit the market as a second treatment for patients with PBC. Typically, patients receive a generic drug called ursodeoxycholic acid. It can help prevent or delay liver damage, but it's less likely to improve the PBC-related itching. Ocaliva, a second treatment patients can add after a year, can actually make the itching worse.
CymaBay Chief Executive Sujal Shah described the itching tied to PBC as "menacing" in a recent interview with Investor's Business Daily.
"Itching in PBC is almost, you could consider internal or systemic," he said. "Your mind tells you your arm, elbow or leg is itching. You itch and you get no relief. So, this symptom decreases quality of life very significantly for people living with PBC."
But RBC's Abrahams says getting to the "optimal" $650 million in sales assumes a good portion of Ocaliva patients would have to switch to seladelpar or add it on. Further, all new patients would have to start on seladelpar — a high bar considering Ocaliva is going generic within eight years. And it would mean Ipsen's competing drug, elafibranor, would have no role in the market.
"Though we acknowledge with a higher-quality drug there could be broader use and better patient retention that expands the sales opportunity," he said in a report.
Gilead Can 'Afford To Be Selective'
For Gilead, "seladelpar does fit well" and could allow the biotech Goliath to leverage the sales force behind its hepatitis treatments. Abrahams has a sector perform rating on Gilead stock, but doesn't list a rating for CymaBay stock.
In a recent discussion with IBD, Gilead CEO Daniel O'Day kept the cards close to his chest when asked about business development.
"We can afford to be selective right now because of the strength of our current portfolio," he said, noting the company has multiple late-stage studies in progress and "no significant patent expirations until 2033 at the earliest."
"We will continue to supplement our pipeline with appropriate business development, but they will be complementary to what we have internally."
CymaBay stock had already had a good run leading up to Gilead's takeover news. Shares bottomed out most recently at 1.96 in May 2022. Since then, however, the stock has soared exponentially. Last year, alone, CymaBay shares surged nearly 261%. The stock has continued to go gangbusters this year.
Shares have a strong Relative Strength Rating of 98, according to IBD Digital. This puts CymaBay stock in the top 2% of all stocks when it comes to 12-month performance.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
