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.
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'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."
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.
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.)