Virus Hunter - Pharmaceutical Executive


Virus Hunter
Gilead goes after big game.

Pharmaceutical Executive

John Martin, president and CEO of Gilead, outside of the company's Foster City, California, headquarters

Of all disease agents, viruses are the most challenging prey. They are crafty bits of genetic material that penetrate healthy cells and manipulate them into making more virus. The scientists who hunt them must be equally stealthy: Search and destroy does not work. And in this game, scientists cannot really boast of conquest, they must settle for simply holding their opponent at bay. To accomplish even that, the deadly human immunodeficiency virus (HIV), which affects an estimated 40 million people worldwide, must be attacked daily in three different ways.

John Martin, president and CEO of Gilead Sciences in Foster City, California, is a tireless virus hunter (25 years and counting) with his eye on the big trophy: a triple combination, once-daily pill that controls HIV. After a decade of effort, he has the first two products in that arsenal already in place. And deep in its pipeline, Gilead has the makings of the third. That trifecta lead Business Week, in a June 2003 article, to name the company one of four Best Picks for pharma investors.

The Politics of Price
"The most important goal of our research programs has been coming up with drug C," Martin says. Why "drug C"? The standard of care for HIV patients is three different drugs (A,B,C) that include at least two different—and compatible—mechanisms of action. Currently, most individual HIV therapies must be taken two and three tablets at a time, several times a day, with and without food—times three. That's a lot of pills and scheduling for patients. (Even most combination products must be taken more than once a day.) So the quest for AIDS therapy makers is to find or develop a third drug that will be easy for patients to take. "One pill, once a day, safe, well tolerated," as Martin describes.

Gilead is taking that quest one step further. First, it developed a once-a-day pill that functions as "drug C" for other combinations. Then it developed its own once-daily combination. Now, the company seeks to produce a third therapy (its own "drug C") that will make Gilead a one-stop shop for HIV patients. Says Martin, "We've finally come up with something we think puts us ahead of the competition."

At a Glance
New Direction Martin knows the competition from an insider's perspective. A PhD in organic chemistry, he had been working on antiviral drugs for 12 years—most recently at Bristol-Myers Squibb, where he helped develop Zerit (stavudine) and Videx (didanosine)—when headhunters recruited him in 1990 to conduct research at Gilead. BMS had cut its antiviral budget, and he had been considering leaving to start his own company, so the opportunity seemed like the right thing at the right time. At that point, three-year-old Gilead was still focused on antisense research and had nothing to show for it. But Martin, who brought the license to a library of antiviral compounds with him from BMS, had other plans.

Executive Team. EVP and CFO John Milligan (left) and EVP of R&D Norbert Bischofberger (right) both joined Gilead in 1990, the same year as John Martin.
"The fact that there were 30 people here that understood nucleic acid chemistry was a great foundation for starting a research program in nucleotide antivirals," Martin recalls. "And the people here were eager to move to something that would be successful. They had realized that the antisense research was very long, very difficult, and very improbable."

Martin's quest for a new AIDS therapy based on nucleotides would have its own struggles and take more than 10 years to bring to market. But the CEO says that pharmaceutical research is like soccer: It's hard to follow, and there aren't many goals scored. "But the day-to-day activities are so exciting," he says, that he rarely gets discouraged.

During that decade, Gilead brought two other antiviral drugs to fruition—giving the company an internal source of revenue. First, the company developed Tamiflu (oseltamivir) for the treatment and prevention of influenza, and in 1996 licensed it to Roche for commercialization. That same year, Gilead received FDA approval to market Vistide (cidofovir), an injectable treatment for cytomegalovirus (CMV) retinitis, an opportunistic infection that causes impaired vision in AIDS patients. Vistide would be the first of three drugs to be approved that were based on the compounds Martin brought with him from BMS.

Tamiflu has had steady growth, from $38.7 million in 1997 to $324 million in 2003. But Vistide has remained a small product, largely because the success of AIDS drugs has limited the number of patients who contract CMV.

Lateral Push The revenue stream from the first two products wasn't enough to push Gilead toward its major goal—financing the Phase III clinical trials of Viread (tenofovir), its HIV blockbuster in the making. Rather than take on a partner, the company decided to increase its cash flow. In 1999, after two years of talks, Gilead beat out several other competitors to buy NeXstar, based in Boulder, Colorado.

"They had a product, AmBisome [amphotericin B], which had been launched worldwide and addressed unmet medical needs," Martin explains. "It's a lifesaving [antifungal] drug for bone marrow transplant patients. They also had a European sales organization, and we were just about to embark on building one for launching our products. They had a manufacturing division in Southern California, which greatly increased our acumen in understanding manufacturing and distribution. Initially, people were somewhat skeptical, but quickly understood. We bought the company for $550 million. AmBisome last year had revenues of $198 million. So even there, that's a bargain."

Triple Crown
The purchase included a second marketed therapy: DaunoXome (daunorubicin citrate liposome injection), an anticancer agent approved for the treatment of Kaposi's Sarcoma in people with AIDS—giving the company four revenue-producing products. Gilead kept the parts of NeXstar that meshed with its portfolio and sold the projects and technologies that didn't, including a promising oncology unit to OSI Pharmaceuticals.

At the time, Martin thought NeXstar was a "once in a lifetime" acquisition. But in 2002, there was an opportunity to buy Triangle Pharmaceuticals, a Durham, North Carolina, company with a deep pipeline of antivirals. "Triangle actually turned out to be a better deal," Martin says, "because they had the product, Emtriva [emtricitabine], which fits perfectly with Viread. With the pharmacology, the two drugs match very nicely."

Geoff Porges, an analyst with Sanford Bernstein in New York, comments, "Gilead is one of the few companies in the large-cap biotech group where the acquisitions have been consistently positive for investors, and that's unusual. They're highly profitable, strategically focused, and they do good deals."

Fast Fast Track Between those two acquisitions, Gilead finally hit its stride, launching three new products in less than two years—representing nearly 10 percent of FDA's new approvals during that time period. Viread—a nucleotide reverse transcriptase inhibitor for HIV and the first of its kind—was approved by FDA in October 2001. Eleven months later (September 2002), Gilead received FDA clearance to market Hepsera (adefovir) for the treatment of chronic hepatitis B, a disease affecting 400 million people worldwide. Both compounds were from the group Martin brought to Gilead, in other words, BMS rejects.

HIV Market
Two months later, Triangle went on the market, and Gilead picked up its advanced pipeline, including emtricitabine, which was near filing. Keeping the momentum, a scant 10 months later (July 2003), Gilead received FDA approval for that compound: Emtriva, a nucleoside reverse transcriptase inhibitor for HIV. (See "Triple Crown.") All three products have since been cleared by the European Medicines Evaluation Agency (EMEA).

Still working at a breakneck pace, eight months later (March 2004), the company filed an FDA new drug application (NDA) for a Viread/Emtriva combination, an oral, once-daily medication that is currently being tested in clinical trials against GlaxoSmithKline's Combivir (lamivudine+zidovudine). (Because both products were already approved, FDA required very little new data, mostly for bioequivalency.)

R&D at Work: Promising Pipeline
"As a small company, that has kept us very busy," Martin says. "It helps explain why we had to sell off our oncology R&D programs. We just couldn't do everything." But what the company accomplished—with fewer than 1,500 people and limited resources—in such a short time is remarkable. Any Big Pharma company would be happy to boast of three products approved in 20 months, even with fast-track status.

Now the company is reaping the rewards—and showing a profit. Viread had sales of $566 million in 2003, just two years after its launch, a 150 percent increase from the previous year. "We have close to a couple hundred thousand people around the world now taking this product," Martin says.

According to IMS Health data, Viread had 9.8 percent of the US HIV market in 2003, nearly double its 5 percent share in 2002. The other top four products in 2003 were Combivir (15.2 percent market share), Trizivir (10.6), Kaletra (10.6), and Sustiva (9.7 percent). (See "HIV Market" for companies and generic names.)

What doctors and patients like about Viread—besides the fact that it's one pill, once a day—is that it has no restrictions for when it can be taken (except those that may be imposed by other HIV drugs the patient is taking), and it has fewer side effects than many other products on the market.

Norbert Bischofberger, Gilead's executive vice-president of R&D, who joined the company the same year as Martin (1990), explains why: "The side effects from most nucleosides relate back to the inhibition of cellular synthesis. For instance, if a patient experiences bone marrow toxicity, which translates to anemia, it is caused by these compounds inhibiting the replication of bone marrow cells. And that inhibition of cellular replication is less pronounced with Viread than it is with other nucleosides."

A three-year, blinded, randomized study in 600 patients compared Viread with BMS's Zerit (stavudine). "Viread had fewer toxicities and fewer side effects than Zerit," Bischofberger says. "That's the bottom line." The efficacy of both drugs proved to be about the same. "But remember," he adds, "you can't really separate efficacy from toxicity because if somebody drops off the drug because they can't tolerate it, the result is loss of efficacy."

"Viread is a great drug," says Sanford Bernstein's Porges. "But here's the problem. AIDS patients are all getting three or four drugs. If you only sell one drug, you can only get 25–30 percent market share, even if you're in every patient. There is ultimately a cap to how much you can build with one compound." Porges is much more optimistic about the Viread/Emtriva combo product under FDA review. "It's a dream compared to every other Phase III [HIV] compound. There's no safety risk. There's no efficacy risk. And in return, Gilead's HIV franchise gets a whole new leg to it. Each new patient that they capture after the combination comes along will be twice as valuable to them as each new patient is now. My peak sales forecast for the combination: $1.2 billion in 2008."

Complex Market Clearly, treating HIV is more complicated than, say, lowering cholesterol, which can be accomplished with one product, made by one company. Martin explains: "The problem with treating AIDS patients is that they have had to take multiple drugs, multiple times per day, with and without meals. If the patient doesn't take at least 95 percent of the pills during the course of the year, resistance mutations develop, the drugs fail, and the patient has fewer treatment options.

"So what was needed—a very high hurdle for us—was one pill, once a day, potent, well tolerated, that did not readily give rise to resistance. A big part of that is just being well tolerated. With Viread we were able to achieve that."

But to be clear, Viread, like other AIDS drugs is not a stand-alone product; it must be taken with other antiretrovirals. Currently, there are five types of HIV products on the market: (See "HIV Market" for a complete list.)

  • Protease inhibitors block the protease enzyme, so the virus makes copies of itself that can't infect new cells. There are eight on the market.
  • Non-nucleoside reverse transcriptase inhibitors (NNRTIs) attach themselves to the reverse transcriptase enzyme and prevent it from converting the virus' RNA to DNA, thus preventing it from replicating. Three are currently available.
  • Nucleoside reverse transcriptase inhibitors (NRTIs) contain faulty versions of the building blocks used by reverse transcriptase to convert RNA to DNA, so the virus can't replicate correctly. Emtriva is one of seven (plus two combination products) in this group.
  • Nucleotide reverse transcriptase inhibitors (NtRTIs) work in much the same way as NRTIs (and are considered by many to be part of the same class), but nucleotides don't undergo the same cellular transformation (nucleosides become nucleotides in the body). Viread is the only therapy in this class.
  • Fusion inhibitors block the virus from entering the cell. Fuzeon (enfuvirtide), a polypeptide injection sold by Roche is the only drug with this mechanism of action.

So even Gilead's combination product (Viread/Emtriva), which is awaiting FDA approval of its marketing name, must still be taken with a third drug from a different class—that much sought after "drug C." For Gilead, that third therapy is in the works, a protease inhibitor (GS 9005), for which it submitted an investigational new drug (IND) application to FDA in January this year.

Expanded Research Although Martin says, "The protease inhibitor is really the next exciting product in the pipeline," it has yet to be tested in humans. Closer to approval (Phase III) is a new indication for emtricitabine for chronic hepatitis B. (See "R&D at Work.") And in Phase II, Gilead has another HIV therapy, GS 7340.

"It's a drug that's very similar to Viread," Bischofberger explains. "It has the potential advantage of having higher potency at a lower dose. The lower dose may not seem like a huge deal, but if you can get away with 75 milligrams versus 300 milligrams, it's better suited to a combination product." Bischofberger echoes Martin's quest for the ultimate HIV drug: "What we want to do by 2007/2008 is to have this one pill, once-daily, triple or quadruple HIV therapy. When you combine three drugs in one pill, you have to make sure that each drug is very potent so you don't need that much of each. In theory, you could have a single, small 500 milligram pill. This is a vision that I believe will materialize."

Also still in the research stage are protease and polymerase inhibitors for hepatitis C and small molecules for therapeutic areas other than anti-infectives. "There are various things that happen that immune systems are involved in," Martin says. "There are cancers, for instance, or immune suppression transplantation, psoriasis, arthritis, things like that. So within those areas, there are different types of programs we are working on. But we are not really disclosing which ones yet."

"They have a lot of products on the market and several right behind, so they don't feel the need to talk about preclinical compounds or direction in programs," says Tom Dietz, co-CEO of Pacific Growth, a San Francisco biotech research and investment firm. "But they have talked about getting back in oncology and expanding into anti-infectives more broadly. The research is clearly going on, just look at the burn rate and R&D spend."

Many of Gilead's therapies, both approved and in the pipeline, are prodrugs. Martin explains: "Any scientist can make an inhibitor for a disease process or an enzyme. The key is to figure out how to change that inhibitor, through additional chemistry, into a drug. Sometimes it's making it more potent. Sometimes it's improving its safety profile, or making sure it can be orally absorbed.

"Our products in the nucleotide area are the chemical design of that type of potent activity. So we changed the structure by adding more chemistry to it that allows it to be orally absorbed. Then in the blood stream, enzymes cleave that chemistry off to get back that parent compound. So you sneak it in. It's a pretty simple thing."

Bracing for the Future Such rapid growth can sometimes plunge a company into a new playing field before it is ready. "The question about this company is whether they can deliver on this combination product commercially," Porges says. "They've tended to under-promote new products. It's a biotech mindset: 'How many sales reps can we get away with?' When Gilead launched Hepsera, they didn't add new reps. Viread was a rocket, but they pulled reps away from it to sell the new drug. For a new product, you can't have too many reps. And now with this combo product, they're going head to head with GSK, which has significantly more field support. Their only weakness is in their sales and marketing leadership."

The company's executive team realized that as well. Executive vice-present and CFO John Milligan says, "With the new product launches, we grew so quickly to such a stage that we overwhelmed the structure and capacity of our sales and marketing organizing. So we hired a consulting group to come in and do a diagnostic, and they came back with recommendations on the things we needed to do and the people we need to grow for the future. And we decided to act on them."

Last month, Gilead separated its sales and marketing functions into a new division and began a search for an "executive vice-president, commercial" to lead the unit. As part of the reorganization, two current senior executives will vacate their positions, one leaving the company and the other stepping out to become a business advisor.

"The changes in their reporting structure are meant to enhance their commercialization effort," Dietz comments. "They're gearing up to the next level, and they have a product that can pull them to that level."

In another marketing move, at press time Gilead announced that it was in talks with BMS (and its marketing partner, Merck) to combine Viread/Emtriva with Sustiva in a once-a-day pill. Also in preparation for future growth, Gilead recently purchased (for $123 million) the Foster City campus where its headquarters had leased eight of 16 buildings. As its sales and marketing efforts increase, the company will be able to easily add office space and personnel.

Despite the expansion, the company philosophy is to stay lean, outsourcing every process that it can. Martin runs through the list: "We don't do any work with animals. For clinical studies, we hire CROs [contract research organizations] to do all the data management, all at the sites to make sure everything is done right. We have a pilot plant that we contract out of all the active pharmaceutical manufacturing. Almost all the product, all the pills are contracted out. We do make AmBisome, because that is a proprietary process. But even the group that develops those manufacturing processes is contracted out."

Do the Right Thing Martin also is preparing early to avoid the compliance and ethical pitfalls that often befall big companies under pressure to generate big revenue. Every new employee is handed a plastic laminated 11x7-inch card that spells out the Gilead creed. Integrity is at the center of the logo, surrounded by teamwork, accountability, and excellence.

Making AIDS drugs also comes with a special mandate for social responsibility. And Gilead is trying to fulfill that role. Although new to the market, Viread is already available through an access program at "no profit pricing"—which covers the manufacture and distribution cost of the product—to 68 countries.

"Our at-cost program goes through a company that's based in the UK," Martin says. "They make sure we're shipping drugs where there is a sustainable program. So someone starts taking the drug, they ensure that they keep getting it. That is actually the most important thing." But he admits that the program has limitations and that "not a lot of patients are treated in Africa so far." But as part of the company's effort to make that happen, Martin accompanied Health and Human Services Secretary Tommy Thompson on his trip to Africa in December 2003 to help launch a US global AIDS program.

Gilead is also doing what it can to ensure that at-cost drugs don't end up on the black market. "We have approval of a different color pill," Martin says. "Viread is blue, but we have a white pill that is approved by FDA for export to use in our access program. As far as we know, we are the only company who has done it."

Overall, Gilead is on a roll. Sales for 2003 were $836 million, a 97 percent increase from 2002; its stock is valued at around $54 (up from $24, three years ago); and most analysts expect the company to outperform the market. But Dietz warns that Gilead, like all companies, can't thrive on organic growth alone. "They're fine for a significantly nice window, but over that window they're going to have to do things to make sure they have something to follow on for the next stage of the company."

Martin concurs: "Most important to long-term growth is to make sure that the drugs we have now, and the fixed-dose combination, continue to grow in sales over the next few years. The revenues and earnings from that growth then can fund the additional programs we would like to do." In a nutshell, his guiding philosophy for the company? "You have to have a variety of grand plans and act on them all."


blog comments powered by Disqus

Source: Pharmaceutical Executive,
Click here