Gilead Deepens Roots in Seattle, Seeks Long-Term Payoff From Lung Disease Research
Gilead Sciences spent $365 million to get a toehold in Seattle back in 2006, and so far, it has zero U.S. product sales to show for it. That’s made investors antsy, but it hasn’t deterred the world’s second-most valuable biotech company from continuing to bet big on Seattle as part of its plan to diversify away from its heavy reliance on HIV medications.
That was one of the interesting points I took home last Friday from Bruce Montgomery, the senior vice president and site leader for Gilead Sciences in Seattle. He made his comments during a talk at the Technology Alliance’s Science and Technology Discovery Series.
Foster City, CA-based Gilead (NASDAQ: GILD) has made a $50 million investment in a new 100,000 square-foot lab and office building along Eastlake Avenue in Seattle, Montgomery said. The local branch, which now counts 150 employees, hopes to move in to the new digs by February 26. The company is hoping that the new surroundings, with sweeping views of Lake Union, will inspire the local team to invent big new drugs. That’s because Gilead got about 90 percent of its $5.3 billion in 2008 revenue from antiviral treatments, mainly for HIV. While the HIV franchise has made Gilead a success, the company has spent several years trying to diversify with treatments for serious lung diseases and cardiovascular conditions.
The Seattle team is supposed to create big new treatments for lung diseases like cystic fibrosis, chronic obstructive pulmonary disease, and idiopathic pulmonary fibrosis. But as of yet, the local team hasn’t delivered a blockbuster product. The heat is definitely on to start producing, at least in the eyes of Wall Street. Gilead stock dropped 15 percent in 2009, while the Amex Biotech Index composed of its large company peers climbed 45 percent.
“After a long and successful track record of product development, geographic expansion, and acquisitions, Gilead has recently fallen victim to slowing growth and execution missteps,” said Michael King, an analyst with Merriman Curhan Ford, in a note to clients Dec. 30. “Gilead Sciences has long been admired as a paradigm of drug discovery and development, as well as business execution. Having grown to a $45 billion market cap today on the basis of its HIV franchise, the company has recently experienced slowing growth as this franchise matures. In addition, the company has gotten little benefit from its $4 billion worth of acquisitions.”
Montgomery is hoping to give his bosses some good news to satisfy Wall Street next month. The company is seeking FDA approval for aztreonam lysine (Cayston), an inhalable antibiotic that was shot down by the agency back in September 2008. This time, Gilead is hoping it has satisified regulators that the drug’s benefits outweigh the risks, especially since an advisory panel recommended in a 15-2 vote that the drug be approved for sale in the U.S. The agency’s deadline to deliver its verdict is February 13.
So what did Gilead pay the $365 million for when it acquired Montgomery’s old company, Seattle-based Corus Pharma? Much of it was based on the prospects for aztreonam lysine, and the ability of the Seattle-based team to create more lung drugs like it. So Montgomery spent most of his talk reminding people about the idea for aztreonam and why he hopes it will be a useful advance for cystic fibrosis.
Montgomery, a pulmonologist, has spent a big chunk of his career thinking about cystic fibrosis. This is a genetic disorder that affects about 30,000 people in the U.S. It causes a buildup of thick, sticky mucus in the lungs, which can become a breeding ground for pseudomonas aeruginosa, a bacteria that can turn deadly.
Earlier in his career, Montgomery directed teams that developed two important advances for the field—Roche’s dornase alfa (Pulmozyme), and later, Novartis’s tobramycin for inhalation (TOBI). Montgomery pointed out that these drugs played a part in helping transform CF from a death sentence in children to a condition that people can live with into their late 30s on average.
“I’m pretty much responsible for the increase in the life expectancy of CF patients by about 15 years,” Montgomery said.
As good as an inhaled antibiotic like TOBI was for patients, Montgomery knew it had shortcomings. Patients had to take it through a nebulizer that delivers the drug as inhalable particles for 20 minutes, taken twice daily. Many of the patients are teenagers, and as Montgomery put it, “teenagers aren’t the most compliant people in the world.” So that meant that patients would take the drug when they felt sick, but wouldn’t consistently stick with the demanding regimen all the time. And also, bacteria can find ways to resist any one drug when it’s given repeatedly.
“Bacteria develop resistance to therapy. It’s a fact of life. Some view that as a problem,” Montgomery said. “I view it as a commercial opportunity.”
So the idea was to come up with a more convenient delivery mode, and a different antibiotic, so that patients would be able to take alternating treatment cycles with TOBI and something else. The idea was to transform aztreonam, an intravenous antibiotic, into an inhalable form. When combined with a new nebulizer from Germany, the new drug could be given in a more convenient two-minute inhalation, two or three times a day, through a handheld device, Montgomery said. And by delivering it directly to the lungs, where the bacteria were hiding out, the hope was to deliver 1,000 times greater concentrations. “This way, you could deliver a neutron bomb to the lungs,” Montgomery said.
The drug has shown in a pair of clinical trials that it can help patients breathe better, and the company was also required to gather questionnaire data that showed it improved patients’ quality of life. The product has now been approved in Europe, Canada, and Australia, but Montgomery wasn’t making any predictions that he’s going to get clearance in the U.S. next month.
Even so, King, the Merriman Curhan analyst, isn’t expecting much commercial success. He’s forecasting $31 million in sales from aztreonam lysine in 2015.
Montgomery didn’t offer any sales forecasts in his talk, but he’s clearly suggesting it has bigger potential than that. He said aztreonma has generated some “dramatic responses” in a mid-stage clinical trial of patients with bronchiectasis, a disease in which part of the bronchial tree in the lung expands too much and blocks airways. The results were compelling enough that Gilead plans to start a pivotal study for that use in 2010, and Montgomery noted it could be a bigger commercial opportunity than cystic fibrosis, because it affects more patients.
Montgomery was pretty vague about some of the other projects in the pipeline. Three or four research programs are progressing for chronic obstructive pulmonary disease—a leading killer in the U.S. that’s commonly found in smokers, and which has no effective treatments. That’s a big, long-term, risky challenge that few companies other than Gilead have the money and expertise to take a swing at. But he definitely wanted to leave the audience of Seattle business leaders with the impression that Gilead is here to stay for the long run.
“I think I have another 10 years left,” said Montgomery, who’s 56.