all the information, none of the junk | biotech • healthcare • life sciences

Gilead Pursues Cancer, Inflammation as Next Step To Diversify Beyond HIV

Xconomy San Francisco — 

Gilead Sciences has heard it all before—it has an awesome cash machine going in the HIV drug business, but it won’t last forever, and it has never really diversified well into other disease categories. Now, through its acquisition of Seattle-based Calistoga Pharmaceuticals for as much as $600 million, Gilead is making clear that one of its big bets for the future will be in two huge related markets—cancer and inflammatory diseases.

Foster City, CA-based Gilead (NASDAQ: GILD) has grown into the world’s second-biggest biotech company by market valuation, at about $31 billion, through selling anti-viral drugs that account for about 82 percent of its $7.95 billion in total revenue last year. One of the key patents on a linchpin of its HIV franchise, tenofovir (Viread), expires in 2018, so the clock is ticking in a business like biotech with long product development cycles.

Gilead has shelled out big bucks in the past to acquire drugs that have provided little returns. It paid $2.5 billion in 2006 for Myogen, the developer of ambrisentan (Letairis), and then plunked down $1.4 billion in 2009 for CV Therapeutics and its lead asset, ranolazine (Ranexa). Each drug generated about $240 million in sales in the past year, Gilead has said.

While shareholders may think they’ve seen this movie before, the acquisition of Calistoga is different in that it represents Gilead’s first major foray into the cancer drug business—a vast market thought to be worth as much as $84 billion by 2012, according to Cowen & Co. Gilead’s essential bet, which is discussed in more detail in this related story about Calistoga, is that cancer will become a chronic, manageable disease in the future, much like HIV has become today.

Norbert Bischofberger, Gilead’s chief scientist throughout its long rise to the top of the anti-viral HIV business, says he’s been particularly intrigued by recent examples like the one at Berkeley, CA-based Plexxikon, in which scientists crafted a specific drug against a specific target. The result looks like a big leap ahead in the treatment of melanoma, when compared with more generalized cell-killing chemotherapies of the past.

Norbert Bischofberger

“If you have a compound that specifically works against a mutation, something very specific, it should be safe, and very effective. That’s what they are seeing now,” Bischofberger says. “We believe that’s where the whole field is evolving. It’s moving in that direction, because for the first time, we have the tools to sequence quickly and cheaply a lot of clinic samples, and find out the drivers, the mutations at work in certain cancers.”

Bischofberger certainly isn’t the first to observe that cancer R&D is moving away from pathology-based understanding (breast cancer) to more molecular-based understanding (breast cancer that overexpresses a certain mutant protein like HER2). But it is the first time Gilead has put major resources behind a cancer program—although it has been leaning in this direction since its acquisition of CGI Pharmaceuticals last year. Branford, CT-based CGI Pharmaceuticals has a specific drug in animal testing made to hit a target called Syk, which could be complementary with the specific PI3 kinase blockers in the works at Calistoga.

“I’d view this as the foundation upon which we’ll build,” Bischofberger says.

Wall Street didn’t quite see it that way. Shares fell 2 percent to $38.51.

For folks looking for something short-term to boost the Gilead share price, this certainly isn’t it. Calistoga has no marketed products, and its lead drug is just now entering the pivotal phase of clinical testing required for FDA approval. It’s still too early to really assess how much its drugs could be worth, since researchers are still trying to figure out which diseases the drug might be most useful. But Calistoga’s lead compound did show some compelling ability to keep tumors in check for patients with chronic lymphocytic leukemia and indolent “slow-growing” non-Hodgkin’s lymphoma in a study of 177 patients, which was presented in December at the American Society of Hematology. Data hounds can see more of the details here in this Calistoga presentation at the JP Morgan Healthcare Conference—particularly the waterfall charts on page 16 and 20.

One analyst, Thomas Wei of Jefferies & Co., disagreed with the market reaction yesterday, saying he was impressed with the strategic move: “While we continue to believe the new HIV combo pills may fall short of expectations and expect the stock to remain range-bound, we are impressed by today’s acquisition of a promising asset and see it as a step in the right direction towards building long-term shareholder value,” Wei wrote yesterday in a note to clients.

Gilead envisions the Calistoga drugs becoming useful for specific kinds of blood cancers, and for inflammatory diseases that are partly driven by overactive proteins in what is known as the PI3 kinase pathway. Gilead was won over the by the data it saw from Calistoga’s first clinical trial in cancer, and it sees more potential in inflammatory diseases based on other published research, Bischofberger says.

While $600 million might sound like a lot of money to you and me, Bischofberger made it sound like chump change. The company generated more than $720 million in cash flow in the fourth quarter alone, meaning it can afford to buy a company like Calistoga without doing any leveraged financial contortions. The company’s cash horde—which stood at $5.3 billion heading into this year—will be used to invest in the company’s pipeline, buy back shares to boost the stock price, and to obtain the rights to promising new drugs like the one from Calistoga, Bischofberger says. People should expect Gilead to continue building out its cancer drug portfolio, Bischofberger says.

Whether this will pay off, both scientifically and financially, we won’t know for a few more years. But Gilead is betting it will know before the HIV patents start expiring and opening the floodgates to cheap generic competitors in its core franchise.

“We think we have a few pieces in place,” with its cancer strategy, Bischofberger says.

By posting a comment, you agree to our terms and conditions.

  • I have HIV and I am an engineer who works for the largest STD dating and support site POZmingle. com. I have to tell you a secret, you can choose not to believe me. But the truth is that this site has more than 1,880,000 members and about 80% members are good looking in my estimation.

    Unfortunately, STD rates soar worldwide and most people with STDs don’t even know that they have them. The government should grant more money for STD education to lower the rates of STD transmission.

  • My FIV cat died from kidney cancer one month ago. Oddly, it was using shark liver oil claimed to stop the growth of kidney cancer. Considering how wrong and bad the results of research on caner one can only conclude that the research has been wrong. I have the feeling that the solution has more to do with the brain than the immune system. Most cancer seems to come with age.