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Gilead Moving into Kinases; Buying CGI for up to $120M
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In the ongoing efforts to diversify its pipeline, Gilead Sciences Inc. offered up to $120 million for privately held kinase company CGI Pharmaceuticals Inc., a deal that offers some long-term growth potential though is unlikely to distract investors from much-anticipated late-stage data that could expand the firm's lucrative HIV franchise.
The Foster City, Calif.-based company has closed a handful of acquisition deals over the past few years aimed at broadening its portfolio ahead of patent expirations for its HIV drugs, such as Viread (tenofovir disoproxil fumarate), which starts losing protection in 2017. And, to date, that acquisition strategy has proved hit and miss.
In 2006, Gilead shelled out $365 million to buy the remaining stake in Seattle-based Corus Pharma Inc., picking up full rights to Cayston (aztreonam), an inhaled antibacterial therapy for use in cystic fibrosis patients that gained approval in February. The drug also recently showed strong data in a head-to-head study against Novartis AG's TOBI (tobramycin), and analysts have projected sales of $225 million in 2013. (See BioWorld Today , July 21 , 2006, and Feb. 24, 2010.)
A move into the cardiovascular arena met with modest initial success, with the approval of pulmonary arterial hypertension drug Letairis (ambrisentan), gained through the 2006 buyout of Denver-based Myogen Inc. But last year's $1 .4 billion purchase of CV Therapeutics Inc.., of Palo Alto, Calif., turned into a disappointment after late-stage hypertension candidate darusentan, which some analysts had predicted could emerge as a blockbuster, fizzled in a Phase III study. (See BioWorld Today , March 13, 2009.)
True, the acquisition of Branford, Conn.-based CGI is far more low-key. Gilead is paying the full purchase price most of which comprises an up-front payment with the remaining based on clinical progress from existing cash, which totaled about $4.6 billion as of March 31 . And CGI's kinase platform is too early stage to have an immediate impact.
But the deal marks a "potential long-term positive," analyst Bret Holley, of Oppenheimer & Co., wrote in a research report, noting the success kinase inhibitors have had in the cancer market and the growing data supporting their use in inflammatory diseases.
It's also Gilead's first foray into the kinase arena.
"We looked at this as a unique opportunity to expand" the pipeline, Gilead spokeswoman Amy Flood told BioWorld Today , adding that Gilead was attracted to the "interesting science and CGI's established expertise in kinase inhibition."
CGI, which was founded as a Yale University spinout in 2000 (originally named Cellular Genomics Inc.), has built up a library of small-molecule kinase inhibitors, including a lead preclinical compound against spleen tyrosine kinase, or Syk, a target that already has garnered some big pharma attention.
Earlier this year, London-based AstraZeneca plc paid $100 million up front for R788 (fostamatinib disodium), a Syk inhibitor from Rigel Pharmaceuticals Inc., of South San Francisco, that had just finished Phase II testing. The deal also includes more than $1 billion in potential milestones. (See BioWorld Today , Feb. 17, 2010.)
But, though it's the most advanced Syk molecule, R788 "isn't perfect," wrote analyst Thomas J. Russo, of Robert W. Baird & Co., adding that Gilead clearly believes the CGI compounds could have advantages.
"We've been successful in identifying very selective compounds against targets in autoimmune disorders," Mark Velleca, CGI's founder and senior vice president, told BioWorld Today . Those disorders are tough to treat because they require chronic administration, "so you want a very safe profile."
CTI's approach landed technology-based deals with a handful of big-name pharma firms Eli Lilly and Co., Serono SA, Pfizer Inc. and scored a potential $500 million drug discovery deal with San Francisco-based Genentech Inc. (now part of Roche AG) in 2006. (See BioWorld Today , Oct. 5, 2006.)
Its preclinical Syk compound, which could have applications in diseases such as rheumatoid arthritis, had been gathering interest among big pharma, Velleca said. "We had been looking at all kinds of transactions" when Gilead extended its offer to buy the firm.
Upon the acquisition's close, expected in the third quarter, CGI will operate as a subsidiary of Gilead, and Velleca expects most of CGI's employees to remain at the Branford facility to focus on kinase discovery work.
"We look forward to delivering for Gilead, not just with the Syk program but with other programs to come," he said.
In the meantime, Gilead investors are pinning their hopes to late-stage drugs aimed at bolstering the firm's HIV offerings. Data are expected next year from a Phase III program testing the Quad regimen, a fixed-dose combination of elvitegravir, boosting agent cobicistat (formerly GS 9350), plus the two drugs that make up Truvada: Emtriva (emtricitabine) and Viread.
And due up next month are results from a Phase III trial of Truvada in combination with rilpivirine (TMC278), a non-nucleoside reverse transcriptase inhibitor, from Yardley, Pa.-based Tibotec Pharmaceuticals Inc.
Gilead, which has continued to report solid revenues, has seen its earnings nicked by the recent health care legislation, expecting a total of $200 million in costs for 2010. In its first-quarter earnings call, the firm dropped its projected product sales for the year to between $7.4 billion and $7.5 billion. (See BioWorld Today , April 22, 2010.)
The firm also recently reported that it would be closing its 150-employee facility in Durham, N.C., at the end of this year to consolidate R&D work in hepatitis B and C.
"We'd been looking at the most effective structure," Flood said, and "decided to centralize all of it at one site in Foster City."
Shares of Gilead (NASDAQ:GILD) closed at $36.35 Friday, up 63 cents.
Published June 28, 2010
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