Gilead's Pact to Fight Cancer - Analyst Blog
April 01 2011 - 3:30PM
Zacks
Gilead Sciences Inc. (GILD) recently entered
into a research collaboration with Yale School of Medicine for
discovery of novel cancer therapies. Yale and Gilead scientists
will research to find new molecular targets that will help in
development of novel cancer therapies by understanding the basis of
the disease in a better way.
The collaboration will initially extend for four years during
which Gilead will finance $40 million for research support and
basic science infrastructure development. Gilead and Yale School of
Medicine have the option to renew it for upto ten years. If the
collaboration is extended, then Gilead will fund a total of up to
$100 million over the ten-year period. Under the terms of the
agreement, if Yale succeeds in developing any novel therapy, it
will be first licensed to Gilead.
Gilead is aiming to broaden its expertise in the fields of
oncology. In February this year, the company inked a deal to
acquire privately held biotechnology firm, Calistoga
Pharmaceuticals, Inc., which focuses on developing therapies to
combat cancer and inflammatory diseases. The acquisition adds
CAL-101, Calistoga Pharma’s lead pipeline candidate, to Gilead’s
pipeline among others.
CAL-101, currently undergoing mid-stage studies, is being
developed to treat patients suffering from refractory indolent
non-Hodgkin’s lymphoma. Moreover, the candidate is also being
developed as a combination therapy – in conjunction with
Roche Holdings Limited’s (RHHBY) Rituxan
(rituximab) – for treatment-naive elderly patients suffering from
chronic lymphocytic leukemia.
Our Recommendation
Currently, we have a Neutral recommendation on Gilead which is
supported by a Zacks #3 Rank (short term hold). We remain
optimistic on the growth potential of Gilead’s HIV franchise drugs,
Truvada and Atripla, as well its strong HIV pipeline. However, the
company’s HIV drugs are facing patent challenges from generic
companies. Besides, the issues raised by the FDA regarding
contamination at the company’s San Dimas production facility could
add further pressure on the company’s top-line. Gilead’s revenues
also continue to be unfavorably impacted by pricing pressures in
Europe and currency fluctuation.
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