Immunomedics soars 106% after Gilead agrees to acquire the cancer-drug company for $21 billion

• Gilead said on Sunday it agreed to acquire cancer-drug company Immunomedics for $21 billion.
• Shares of Immunomedic soared as much as 106% on Monday following the news.
• Immunomedics sells Trodelvy, a drug used to treat different forms of breast cancer and that is being evaluated for a number of other potential cancer indications.
• Trodelvy was approved by the FDA in April and registered $20 million in sales in its first two months on the market.
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Gilead’s proposed $21 billion acquisition of Immunomedics sent shares of the cancer-drug company soaring as much as 106% on Monday.

Immunomedics developed Trodelvy, an antibody-drug conjugate used to treat triple-negative breast cancer.

Trodelvy received FDA approval in April and recorded $20 million in sales in its first two months on the market. The drug is expected to generate blockbuster sales over its lifetime and is being evaluated as a treatment for a number of other cancer and solid tumor indications.

Gilead expects the deal to immediately bolster its revenue growth, and for it to be neutral to accretive to adjusted earnings per share in 2023, as well as “significantly accretive thereafter,” Gilead said.

Gilead will fund the acquisition through $15 billion in cash on hand, as well as $6 billion in newly issued debt. 

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Over the years, Gilead has received enormous pressure from investors to put its massive cash pile to work. At the end of 2018, Gilead had $30 billion in cash and short-term equivalents, according to data from YCharts.com.

Gilead’s cash pile is expected to drop to $4 billion, given the company’s most recent 10-Q filing indicating that it has $18.91 billion in cash and intends to use $15 billion of cash to fund the Immunomedics deal.

Gilead investors have approved the deal. Shares of Gilead are up as much as 4% in Monday trades.

Gilead said it expects to retain an investment grade credit rating following the transaction, and the deal will not alter its commitment to maintain and grow its dividend over time.

The $21 billion deal was approved by the boards of both companies and is expected to close in the fourth quarter of 2020.