Must credit the San Francisco Chronicle
By BERNADETTE TANSEY
San Francisco Chronicle
In just two decades, Gilead Sciences Inc., the San Francisco Bay Area's second-largest biotechnology company, has established itself as the nation's dominant seller of HIV drugs, with such products accounting for two-thirds of its $3 billion in revenue in 2006.
That's a tremendous success story in an industry where thousands of competitors fight for a place in the sun.
Even as Foster City's Gilead celebrates its 20th anniversary, it's not resting on its laurels.
The biotechnology sector is in turmoil now as major pharmaceutical companies increasingly encroach on its turf -- using science to develop cutting-edge therapies based on how cells work at the molecular level. More and more, Big Pharma is looking to claim this territory by swallowing up biotech companies with promising products.
But Gilead has a great chance to thrive and stay independent by extending its reach into whole new treatment areas. It's continuing down the path it has long followed as a big fish that eats other creatures rather than getting consumed itself.
That's a strategy industry leader Genentech is also following as it uses its commanding position in cancer drugs and the enormous revenue they produce to establish beachheads in new therapy lines, such as Alzheimer's disease and multiple sclerosis.
Gilead doesn't match Genentech in drug innovation, analysts say. Gilead has built most of its product portfolio by acquiring experimental drugs from other companies, rather than discovering therapies through research.
The company is held up as a model of savvy management, meticulous planning and follow-through, something that can be seen in its approach to acquiring technology developed by others. Analysts describe Gilead as a genius of execution rather than a genius of innovation.
"They are extremely methodical," Rodman & Renshaw analyst Michael King said.
One example was Gilead's purchase last year of the Denver-area company Myogen Inc. Gilead paid $2.5 billion for a company in a field unrelated to its major product line. "Didn't they pay too much?" worried some investors who wondered how Myogen figured in Gilead's plans.
Myogen was Gilead's second acquisition in 2006. It had paid $365 million for Corus Pharma of Seattle, developer of a drug for lung infections in cystic fibrosis patients.
These takeovers were calculated to position Gilead in new arenas.
"The idea is to build franchises that we hope will surpass HIV" in growth potential, said Chief Operating Officer John Milligan.
That strategy paid off June 15, when the Food and Drug Administration approved one of the experimental therapeutic drugs that came with the Myogen deal, the lung medication Letairis.
The drug is designed to treat disabling pulmonary arterial hypertension, an elevated blood pressure in the lungs that can cause shortness of breath and heart failure. Analysts predict sales of as much as $1 billion by 2010.
Letairis is one of Gilead's stepping-stones into markets that will make it a more diversified drug company. It is also trying to develop improved medicines for other cardiopulmonary disorders and forms of hepatitis.
But the company is not neglecting its core franchise. It aims to break new ground in HIV treatment through experimental compounds in its pipeline. Gilead scientists are trying to create next-generation HIV drugs called integrase inhibitors, designed to stop the virus from multiplying.
In some new markets, Gilead is a late-comer taking on an entrenched competition. But the company wasn't the first to come to market with HIV drugs, either.
"They're fast followers," King said. "They followed behind GlaxoSmithKline and Bristol-Myers (in HIV drugs) and ate their lunch."
Gilead's top-selling products are HIV drugs Viread and Emtriva, and combination pills with both drugs.
The multi-drug tablets simplify the treatment regimens needed to suppress viral growth and keep HIV-positive people healthy. The combination pill Truvada contains Viread and Emtriva. Atripla, approved in mid-2006, combines both the Gilead drugs with Bristol-Myers Squibb's Sustiva. Atripla is the first product that contains all three medications used in a typical HIV regimen in a single pill taken once a day.
Analysts expect Gilead to challenge the market leadership of large pharmaceutical companies internationally as Atripla wins regulatory approval in Europe and elsewhere.
JPMorgan analyst Geoffrey Meacham estimates that Gilead's HIV-drug revenue will grow by 40 percent to about $3 billion in 2007.
Analysts expect HIV to be Gilead's primary source of growth for the foreseeable future. But Gilead needs to expand into other disease areas to maintain the growth rates Wall Street expects, BWS Financial analyst Hamed Khorsand said.
(E-mail Bernadette Tansey at btansey(at)sfchronicle.com.)
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