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 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.
The Politics of Price
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."
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.
At a Glance
"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."
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.
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.
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."
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.
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