Gilead Sciences Building on HIV, Becoming Cancer Drug Force

4/1/13Follow @xconomy

Gilead Sciences has had what you could call a “high-class problem” the last few years. Biotech companies that are great at one thing eventually must prove they can be great at something else. And Gilead is showing signs that it’s finally on its way to becoming a truly diversified biotech industry leader, with a plan to make it big in treating cancer and inflammation.

Gilead, the Foster City, CA-based company (NASDAQ: GILD), surpassed GlaxoSmithKline about five years ago as the world’s biggest maker of HIV drugs. It’s a great thing. Gilead can be proud of turning HIV into a manageable disease for millions of patients. And Gilead didn’t lose its edge when it got to the top. It has done smart work to increase access to its HIV drugs in poor countries, and has rolled out a series of product line extensions in rich countries to keep its sales going up, up, up.

Investors loved it and have been richly rewarded for staying with Gilead. But about two minutes after Gilead became the king of HIV drugs, investors demanded to know, “What else you got coming?”

For a while, Gilead made costly, and underwhelming, moves into the worlds of respiratory and cardiovascular drugs. It finally hit gold in November 2011, when it paid $11 billion to acquire Pharmasset to get what looks like the next big thing for hepatitis C. It’s a new multi-billion-dollar market that plays to Gilead’s strength in antivirals.

Most people who follow Gilead are laser-focused, rightly, on its hepatitis C prospects. What fewer investors and media have noticed—Bloomberg News being one exception—is that Gilead has simultaneously been laying a foundation over the past couple years to get into cancer.

But Gilead is not just making some vain or half-hearted attempt to get in the cancer drug development business. It has made so many shrewd moves over the past two years that, in my view, it is now on track to become a cancer powerhouse for years to come.

This realization hit me a couple weeks ago after sitting down with Roy Baynes, Gilead’s senior vice president of oncology and inflammation therapeutics, during his visit to Gilead’s Seattle operation. Even though I’ve written about a number of the acquisitions and deals that Gilead has done in the cancer field the past couple years, I hadn’t quite seen the whole strategy to what Gilead was doing. Baynes, a soft-spoken scientific executive who previously worked at Amgen, laid out a sequence of events that makes it clear Gilead is putting a lot of its money and human capital into a long-term plan for cancer and inflammatory diseases.

Roy Baynes, Gilead's senior vice president of oncology and inflammation therapeutics

“The great good fortune and success we’ve had is now helping us move into other areas, with oncology and inflammation being one,” Baynes says. “The progress has been really quite remarkable. If you looked at Gilead two and a half years ago, there was very little in the oncology portfolio. In fairly short order, we have a whole array of important targets in the [hematology/oncology] space.”

Take a look at what Gilead has scooped up through this series of acquisitions and licensing deals:

June 2010: Gilead acquired Branford, CT-based CGI Pharmaceuticals for as much as $120 million. This deal enabled Gilead to get its hands on a library of small-molecule compounds designed to inhibit kinase drug targets. The lead compound is made to hit spleen tyrosine kinase (Syk), one of the hot targets in biology for B-cell-related cancers, and inflammatory diseases. A little more than a year after Gilead made this acquisition, Biogen Idec (NASDAQ: BIIB) paid $45 million upfront and potentially $508 million in milestone payments to in-license a library of rival Syk inhibitors from South San Francisco-based Portola Pharmaceuticals.

December 2010: Gilead agreed to acquire Palo Alto, CA-based Arresto Biosciences for $225 million upfront, plus future undisclosed milestone payments tied to sales goals. The main thing it got here were people with skills in making genetically engineered antibody drugs, specifically ones aimed at the extracellular matrix, which is thought to play a role in fibrotic diseases and cancer. The lead drug candidate, now called simtuzumab, is designed to treat idiopathic pulmonary fibrosis (IPF), by hitting a target known as LOXL2. The drug has now advanced into Phase II trials against IPF, myelofibrosis, colorectal cancer, and pancreatic cancer. The drug certainly still has a lot to prove. But many companies have since piled into the IPF competition, as Bristol-Myers Squibb paid $325 million upfront to acquire San Diego-based Amira Pharmaceuticals for its IPF drug about eight months later, and Biogen Idec paid $75 million upfront a year ago to get back the rights to an IPF antibody it had spun out earlier to Cambridge, MA-based Stromedix.

February 2011: Gilead agreed to pay $375 million upfront to acquire Seattle-based Calistoga Pharmaceuticals. This move gave Gilead what looks like it first real jewel. Gilead got … Next Page »

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