Biotech Mergers: Evaluating Risk, Reporting, and Integration of Growth Strategies

Gilead’s Acquisition of Immunomedics: Risk and a Growth Strategy

Abstract

This case deals with the accounting and finance issues surrounding a recent biotech merger and acquisition (M&A) transaction.  Students will work with actual historic and projected data from Gilead Sciences Inc.’s 2020 acquisition of Immunomedics Inc. Corporate acquisitions are plentiful, yet this transaction and case is unique regarding the availability of historic and projected data. Most acquisitions involve private companies where little if any historic or projected financial data is available.  Similarly in public company acquisitions, projected data is rarely published. Both Gilead and Immunomedics were required by the U. S. Securities and Exchange Commission (SEC) to submit due diligence filings. The case relies heavily upon these disclosures.  Students will access this data via EDGAR, the SEC’s data gathering, analysis, and retrieval system and complete five sections in their analysis of the acquisition. Using EDGAR’s public database filings, they will prepare financial projections of their own for the merged entity.  In the process, they will be instructed to draw conclusions regarding the actual price paid for the acquired company and the justification of the actual price paid.  Previous exposure of students to the calculation of the cost of capital and capital budgeting methodologies plus the accounting for intangible assets is helpful.