GILD Gilead Sciences Inc

The world’s biggest HIV drug maker, Gilead Sciences, Inc. (GILD) received a huge boost following approval by the US Food and Drug Administration (FDA) for its once-daily single tablet regimen (STR) for the treatment of HIV in previously untreated adults. The tablet, which will be marketed as Complera, is a combination of Gilead’s most popular HIV drug, Truvada (a fixed-dose, once-daily tablet containing Gilead's Viread and Emtriva), and Johnson and Johnson’s (JNJ) recently approved HIV drug Edurant. Complera is the second STR approved for the treatment of HIV, the first being Atripla, which is marketed by Gilead and Bristol Myers Squibb (BMY). Gilead is also seeking approval for the combo pill in Europe.

Gilead has a license and collaboration agreement with Tibotec Pharmaceuticals (a subsidiary of Johnson & Johnson) for the development and commercialization of Complera. Gilead will be responsible for manufacturing, registration, distribution and commercialization of Complera in the US, European Union, Canada, Brazil, Australia and New Zealand. Johnson and Johnson can co-market the drugs in these territories. The agreement has been expanded to include certain European countries, Latin America and the Caribbean. Johnson and Johnson will be responsible for other territories, particularly Asia Pacific, including Japan, the Middle East, Eastern Europe and all of Africa.

We remind investors that Gilead had re-filed an NDA for Complera with the FDA in February 2011 following a refuse-to-file notice issued by the regulatory body in January 2011 for the NDA originally submitted in 2010. The FDA in its refuse-to-file notification had expressed dissatisfaction with a particular section of the NDA on grounds of insufficient data, requesting further information on the same.

Gilead’s strategy of creating fixed-dose combinations of existing HIV/AIDS drugs has been a resounding success. Gilead’s most popular HIV combination medicines, Truvada and Atripla (a combination of Truvada and Bristol Myers’ Sustiva), have allowed the company to maintain robust growth in HIV product sales. The next near-term key catalyst will be the top-line data release of the ‘Quad” pill in the next two to three months. The much anticipated Quad pill is a combination of Gilead’s pipeline candidate elvitegravir, cobicistat (GS 9350), and Truvada. If approved, Quad together with Complera will further fortify the HIV franchise and help mitigate the impact of the upcoming patent expirations.

In another development, Gilead announced resolution of the warning letter received in September 2010 from the FDA regarding some manufacturing and quality related problems at its San Dimas, California facility. Gilead manufactures AmBisome, Cayston and Macugen at the facility and the FDA’s main concern was related to the manufacturing environment for AmBisome, an injectable drug for the treatment of fungal infections, as well as product quality related systems, procedures and controls. The resolution of the letter removes a major overhang for Gilead, safeguarding the revenue stream from the supply of these drugs outside the US.

Our Recommendation

We currently have a Neutral recommendation on Gilead. The stock carries a Zacks #3 Rank (short-term “Hold” recommendation).

We are optimistic on the growth potential of Gilead’s HIV franchise drugs, Truvada and Atripla. Moreover Gilead’s strategy of creating fixed-dose combinations of existing HIV drugs has yielded enormous success. Complera together with Quad, once approved, has the potential to drive sustainability of the HIV franchise. Besides, the resolution of the FDA warnings letter is a major relief for Gilead. However, we are concerned about patent challenges to its key HIV drugs. We maintain a cautious stance until Complera along with the current pipeline proves its worth, compensating for lost revenues from patent lapses.

 
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