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 a small molecule drug, idelalisib, that’s designed to selectively hit the “delta” variation of the PI3 kinase molecular target. The PI3 kinase family is involved in tumor growth and proliferation, and has been one of the hot targets in cancer biology for years. Calistoga had already shown some impressive data from early clinical trials that said its drug was potent for patients with chronic lymphocytic leukemia, slow-growing or “indolent” non-Hodgkin’s lymphoma, and mantle cell lymphoma. Gilead presented data in December that said this new drug, given in combo with Genentech’s rituximab (Rituxan) and bendamustine chemotherapy, shrank tumors and lymph nodes in 87 percent of patients with chronic lymphocytic leukemia. The study was small, just 52 patients, but the side effects of the new drug were minimal, and it had a long-lasting effect. About 63 percent of the patients still hadn’t seen any tumor progression after two years of follow-up.

If you wonder whether Gilead might have overpaid, consider this: Cambridge, MA-based Infinity Pharmaceuticals (NASDAQ: INFI) has seen its valuation climb to $2.3 billion mainly because of some encouraging, preliminary data for its rival drug that also inhibits the PI3 kinase “delta” variation. And Infinity’s program is years behind Gilead’s in clinical development, by my estimation. Given how many patients could benefit, the likely high price, and the need for patients to stay on this well-tolerated drug for years, it’s easy to imagine it becoming a multi-billion dollar seller in the latter half of this decade.

March 2011: Gilead looked to strengthen its cancer drug discovery capabilities through a sponsored research agreement with Yale University. Gilead agreed to pay $40 million over four years, with an option to extend the deal to 10 years, in exchange for the first shot at commercializing innovations that arise from the partnership.

August 2011: Gilead, traditionally strong in small-molecule chemistry, agreed to acquire a 70,000-square-foot biotech drug manufacturing facility in Oceanside, CA, from Genentech. This deal gave Gilead tons of equipment and infrastructure for making antibody drugs, plus 55 employees from Genentech who know how to make biologic drugs at commercial scale. The facility, Gilead said, would be used to start making larger batches of the antibody drug it acquired from Arresto Biosciences for fibrotic diseases and cancer.

April 2012: Gilead struck a partnership with Lebanon, NH-based Adimab, a prolific antibody drug discovery shop, asking Adimab to make optimal antibodies against two undisclosed molecular targets. Later that month, Gilead formed another partnership with an innovative biotech company, San Diego-based AnaptysBio, another company with considerable antibody discovery skills.

December 2012: Gilead announced a deal to pay $510 million to acquire Mississauga, Ontario-based YM Biosciences. This takeover, like the previous CGI and Calistoga deals, enabled Gilead to get into another one of the competitive fields of cancer and inflammation biology, by getting drugs that go after the JAK1 and JAK2 molecular targets. As Bruce Booth, a partner at Atlas Venture, pointed out on his blog March 13, Wilmington, DE-based Incyte (NASDAQ: INCY) became a $3 billion company on the basis of its JAK2 inhibitor, called ruxolitinib (Jakafi). Pfizer also has a JAK1/3 inhibitor on the market, and Johnson & Johnson, AstraZeneca, and Novartis are all active in this field.

January 2013: Gilead formed a collaboration with Rockville, MD-based Macrogenics, that could be worth more than $1 billion over time to the little company. This deal gave Gilead access to technology for developing “bispecific” antibodies that can precisely hit two molecular targets simultaneously, not just one. Many of the biggest players in biologics—Genentech, Amgen, and Biogen Idec for sure—have been pouring resources into bispecifics because of their potential in treating complex autoimmune diseases.

OK, that’s a lot of action over two years. Roll it all together, and here’s what it says to me: Gilead is for real in cancer and inflammation. It has gotten its hands on some of the very best small-molecule cancer drug candidates that are going after some of the hottest targets in biology — Syk, PI3k delta, and JAK1/2. In places where small-molecules aren’t the best, it has built up capabilities for discovering, developing, and manufacturing targeted antibodies. It has decided to lean on some of the best small companies in the antibody field. It has gotten in touch with some of the best academic cancer researchers at Yale, who are thinking further in the future. It lured away Baynes from Amgen a little more than a year ago, and gave him the opportunity to build a franchise in cancer and inflammatory drugs.

Baynes is a low-key guy when you meet him in person, but if you listen carefully to what he’s saying, it’s audacious.

“Our goal is to get to a steady-state pipeline by about 2015,” Baynes says of the cancer portfolio. That means, he says, that Gilead wants to have a variety of drug programs at the early discovery stage, in preclinical development, and moving along in all three phases of clinical trials.

That’s bold talk for a company that doesn’t have a single cancer drug on the market. A ton of things could go wrong.

But Gilead is showing there’s a clear strategy, and discipline, at work. It isn’t afraid to spend some big money to go after this opportunity it sees. The PI3 kinase drug that it acquired from Calistoga, for example, is moving ahead in five simultaneous Phase III clinical trials of patients with relapsed forms of chronic lymphocytic leukemia and indolent non-Hodgkin’s lymphoma. Baynes wouldn’t disclose the budget for this clinical development plan, or the timeline for when results are expected, but these five trials are all well-designed, randomized studies that are recruiting a total of 1,585 patients.

Not far behind in development, Baynes says, Gilead is looking at the drug’s potential to move into first-line treatment, where it can benefit even more patients. Besides this compound, idelalisib, it has four other drug candidates in various stages of clinical trials.

Some people are starting to notice what’s up at Gilead, and some haven’t noticed, but that’s OK, Baynes says. Soon enough, they’ll see.

“I’d say awareness is growing, but we’re certainly not at the zenith, if you will, of oncology name recognition,” Baynes says. “A slow ramp is also not a bad thing. We want to get the work done, and let the results speak for themselves.”

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