Gilead's R&D cull hinders pipeline extension

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Gilead Sciences is a master of innovation in antiviral drugs, designing molecules that suppress infections in deadly diseases like HIV and hepatitis C and combining them in ways that can damp down resistance. Venturing outside this space is where trouble begins.

The California-based company is killing three projects in gastrointestinal and cardiovascular disease that have just reached a go/no-go decision on pivotal trials. These setbacks only shine the spotlight more brightly on its shrinking antiviral product line and augment investors’ call for a strategic acquisition.

Attrition

Gilead has called time on the non-alcoholic steatoheapatitis (NASH) project simtuzumab, ulcerative colitis candidate GS-5745 and ventricular arrhythmia agent eleclazine, all of which had advanced to phase II or early phase III study. GS-5745 remains active in rheumatoid arthritis as an add-on to standard therapies.

The bright spot from its non-antiviral pipeline was GS-4997, another NASH project that is being advanced into phase III in advanced patients, with Gilead hoping that regulators will allow improvement in fibrosis scores as the primary endpoint.

This pipeline attrition comes in the context of declining sales in hepatitis C and the further announcement that bictegravir/F/TAF would be the last single-tablet regimen Gilead will develop for the broad HIV population.

From one perspective, these were positive announcements in that the group will likely see its R&D expenditures decline – Leerink analyst Geoffrey Porges writes that investment in new pipeline projects “seem unlikely to occupy all Gilead’s available pipeline investment capacity”.

On the other hand, for a company that saw its pharma sales triple between 2013 and 2015 as its hep C franchise took off, investors would like to see some action that will help it sustain its momentum, and NASH is not likely to do that.

Still tilted towards antivirals

A look at Gilead’s sales forecasts by therapy area shows the difficulty it is in. While it will retain its position as the number-one company in the anti-infectives field sales will fall 3% annually through 2022.

Oncology and musculoskeletal products are expected to help pick up the slack, thanks to Zydelig and momelotinib in cancer and filgotinib in rheumatoid arthritis. But the $922m those two therapy areas will contribute to sales will not come close to offsetting the $5.7bn decline in antiviral sales between 2015 and 2022.

Gilead by therapy area
Global sales ($m) Market share Market rank
2015 2022 Total Change CAGR 2015 2022 2015 2022
Cardiovascular 1,288 434 -854 -14% 2.3% 0.7% 14 31
Gastro-intestinal - 200 - - - 0.5% - 52
Musculoskeletal - 458 - - - 0.5% - 34
Oncology & immunomodulators 132 464 332 +20% 0.1% 0.2% 44 55
Systemic anti-infectives 30,719 24,983 -5,737 -3% 29.7% 20.9% 1 1
Other Rx & OTC pharma 12 12 0 -0% - - 229 226
Total Rx & OTC sales 32,151 26,551 -5,600 -3% 4.2% 2.3% 7 13
Source: EvaluatePharma.

What is more, GS-5745 was expected to contribute another $200m and eleclazine $184m; these can probably now be subtracted from any forecasts. So far, no analysts have ascribed future sales to GS-4997, a situation likely to change in coming months.

Another way of looking at Gilead’s fix is that $5.7bn is ascribed to Gilead’s pipeline, all in products that are in phase III – and of this, $5.5bn is HIV or hep C drugs that will at least partly cannibalise existing products.

The big advantage Gilead has is cash – $31.6bn at the end of the third quarter. It has not been afraid to deploy its cash in the form of dividends and share buybacks in the past, but a strategic acquisition seems to be something for which investors are pining.

The executive team, led by John Milligan, has for some time made plain their desire to remain “disciplined” and not rush a big acquisition. But hep C is going into decline faster than investors had expected, and their patience with both the clinical and business development strategy has grown thin.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @ByJonGardner on Twitter 

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