Gilead Sciences and Its Acquired Problems
The failure of a new drug makes a pricey acquisition even costlier.
Gilead announced Tuesday morning that it was discontinuing the development of a late-stage blood-pressure treatment, darusentan, after the drug didn't outperform a placebo in the Phase III study and failed to lower blood pressure in patients with resistant hypertension.
"We are disappointed that darusentan did not achieve its primary endpoints in this study," said Norbert Bischofberger, PhD, Gilead's Executive Vice President, Research and Development and Chief Scientific Officer. "As a result, we think it would be challenging to define an expedient path forward. We would likely be required to initiate another Phase III study and would rather allocate our resources to other promising research and development opportunities in our pipeline."
The drug came from Gilead's $2.5 acquisition of Myogen in 2006. The acquisition was a diversion from what the company typically excels at: HIV treatments. Gilead is one of the leaders in the HIV treatment space and raked in $4.5 billion on the drugs in the first nine months of 2009. Meanwhile, Gilead's blood-pressure medication Letairis, which only brought in about $131 million in the first nine months of 2009, is the only other treatment that the company acquired during the acquisition that has reached the market. Sales have been considered wildly disappointing. There are no other compounds in late-stage research that were acquired from Myogen.
Investors weren't pleased with the outcome; the company's stock dropped almost 4% in morning trading after the announcement to linger near $45, down from its 52-week high of $53.28. The stock drop wasn't expected by analysts, many of which said they'd already taken the drug out of their pricing models.
"Though investors ascribed very little formal value here, the stock could see minor weakness if this disappointment reawakens dormant negative sentiment around the company's move into the cardiovascular space," said Robert W. Baird analyst Tom Russo in a recent research note. "Gilead's fundamentals remain strong and it has more important near-term catalysts including data from HIV pipeline products Quad and Truvada/ TMC278."
Gilead's discontinuation of the program comes later than expected and likely cost the company more research dollars than investors were willing to part with. Gilead said it doesn't comment on R&D spending for specific programs. The drug had raised some safety flags after the first Phase III trial. Other research done on vasodilators in the past has been shown to be effective on reducing death from hypertension, but is plagued by cardiovascular side effects.
"This may disappoint some investors who had higher hopes heading into this data, and we are admittedly surprised that the reason for the drug's demise was efficacy and not safety," said Leerink Swann analyst Joshua Schimmer in a note to investors. "Nonetheless, we did not see a clear path to the market for a hypertension drug that increases the rate of peripheral edema and heart failure for an indication whose goal it is to prevent cardiovascular complications."
The company has recently tried again to shift its focus from the HIV market with the acquisition of CV Therapeutics in April for $1.4 billion. Through this takeover, Gilead has two early-stage cardiovascular drugs. This acquisition, like that of Myogen, has yet to show any promise.
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