Gilead deal reignites optimism in a cancer biotech

Dive Brief:

  • Shares of Jounce Therapeutics, a small biotech located in Cambridge, Massachusetts, rose more than 70% Tuesday after Gilead unveiled plans to take an equity stake in the company and exclusively license one of its experimental cancer drugs.
  • Through the deal, which is expected to close this year, Gilead is paying $85 million up front, plus another $35 million for equity valued at an undisclosed premium. Jounce’s share price went from $4.84 at market’s close Monday to $6.90 in mid-day trading.
  • In exchange, Gilead gets access to the antibody drug JTX-1811, which was designed to help the immune system fight cancer by selectively targeting a protein that’s commonly found on certain immunosuppressive cells. Gilead and Jounce said they’re on track to submit in the first half of next year the application that would allow the drug to enter human testing.

Dive Insight:

Nearly every large pharmaceutical and biotech company is working on cancer treatments. Gilead, which is better known as an HIV and hepatitis C drugmaker, has spent years trying to build up an oncology business as well, and it’s biggest bet came in 2017 through the $12 billion acquisition of cell therapy developer Kite Pharma.

Yet, while Kite has brought Gilead two marketed products, cell therapy has shown to be logistically and financially challenging. Sales of Zydelig, its only other oncology drug, have never taken off. The company’s cancer drug business has, in turn, grown slower than many of its peers. 

Deals, though, can help speed things up.

Gilead CEO Daniel O’Day signaled late last year that his company was in an “acquisitive mode.” That’s proven out across 2020, as Gilead has become one of the industry’s more prolific dealmakers.

In April, it completed a $5 billion acquisition of fellow Californian biotech Forty Seven. Then in the summer, it inked deals with Pionyr Therapeutics and Tizona Therapeutics — two privately held drugmakers that, like Forty Seven, focus on using the immune system to fight cancer. In both of those deals, Gilead took just shy of a 50% stake in the smaller biotechs and options to acquire them later.

Gilead also peppered in a few research and licensing deals over the past few months. They include a 10-year collaboration with Arcus Biosciences to jointly develop and sell cancer immunotherapies, and an expanded agreement with Tango Therapeutics that could give Gilead access to as many as 10 more oncology targets.

Now, Jounce joins the list. The small biotech was co-founded in 2012 by Nobel Prize winner Jim Allison, who serves as chair of MD Anderson Cancer Center’s Department of Immunology.

Jounce quickly attracted interest from one large partner, Celgene, with the two companies entering a strategic collaboration in 2016 centered around the development and commercialization of up to five immuno-oncology treatments — including Jounce’s most advanced experimental drug, JTX-2011. Celgene paid $225 million up front, took a $36 million equity investment in Jounce, and put another $2.3 billion in milestone payments on the table.

Jounce would go public the following year, raising $117 million in an upsized offering.

Since then, however, Jounce has hit a couple significant setbacks that rattled investor confidence. In 2018, it posted lackluster data from a trial testing JTX-2011 in patients with solid tumors. And in 2019, as Celgene was preparing to be absorbed by Bristol Myers Squibb, its deal with Jounce was terminated.

The Gilead deal, meanwhile, would provide Jounce with some near-term cash and, potentially, up to $685 million in future milestone payments. Jounce is also be eligible to receive high single-digits to mid-teens royalties based on worldwide sales if JTX-1811 progresses to market.

Per deal terms, Jounce will lead development of JTX-1811 until it’s cleared for human testing, after which Gilead will have sole rights to develop the drug.

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