Pharmaceutical companies are some of the most innovative businesses around, spending billions of dollars each year to develop new drugs and treatments for the diseases that afflict people around the globe.

That’s one reason you may want to pay attention to drug company Gilead Sciences, which announced on Monday that it will purchase Kite Pharma, in a deal worth nearly $12 billion.

Kite, based in Santa Monica, California, produces an immunotherapy drug that reportedly stimulates the body to fight cancer with its own cells.

Why is this a big deal?

  • Gilead is one of the largest pharmaceutical drug makers in the world. And by focusing on a biotech company that has pioneered novel therapies for cancer treatment, it’s taking a bet on a new market with a huge potential for growth.
  • The biotech market has shown a lot of strength this year, with major indexes that include pharmaceutical stocks increasing in the double-digits. One reason for the gains, financial experts say, is the potentially favorable environment for drug companies created by the Trump administration, which continues to roll back business regulations, and a Food and Drug Administration chief who has promised to speed the approval process for new drugs.
  • Gilead hasn’t made a major acquisition of another business since 2011, and this is the company’s largest purchase to date.
  • Gilead has reportedly amassed billions of dollars in recent years from top-selling antiviral drugs that help fight HIV, hepatitis B and C, and the influenza.

“The acquisition of Kite establishes Gilead as a leader in cellular therapy and provides a foundation from which to drive continued innovation for people with advanced cancers,” Gilead chief executive officer John Milligan said in press release on Monday.

Key Takeaways: Gilead is one of the largest drug manufacturers in the world, and it’s developed critical drugs to fight HIV, hepatitis B and C, and influenza. Its multi-billion dollar purchase of Kite is a significant bet on new advances in fighting cancer, as well as a further demonstration of the strength of the pharmaceutical industry in recent months.

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