National Editor

Having lost its figurative dance partner, Abbott Laboratories Inc., over the summer, Triangle Pharmaceuticals Inc. disclosed that it plans to undergo a "two-step" acquisition by Gilead Sciences Inc. in a deal valued at $464 million.

Durham, N.C.-based Triangle's stock (NASDAQ:VIRS) jumped $1.32 on the news, or 29.3 percent, to close Wednesday at $5.82. Gilead's shares (NASDAQ:GILD) ended the day up 73 cents, closing at $37.61.

Triangle in August regained from Abbott, of Abbott Park, Ill., rights to the late-stage HIV drug candidate Coviracil (emtricitabine) and two other products. Though it was hailed as good news, it also left the firm with limited finances to continue development, and not enough in the way of marketing, sales and manufacturing.

Enter Gilead, of Foster City, Calif., which gets drug candidates in the deal, plus the chance to devise with Triangle once-a-day therapies for HIV as well as hepatitis B.

"Coviracil is a good drug," said Thomas Shrader, analyst with Gerard Klauer Mattison in New York. "It just needs some marketing muscle."

The definitive agreement signed by the two companies involves, in the first step, a cash tender offer for all outstanding Triangle stock at $6 per share and, in the second step, a cash merger in which Gilead will acquire any remaining Triangle stock at the same price.

After the deal is done, Triangle will become a wholly owned subsidiary of Gilead, which is providing Triangle with $50 million of interim financing to pay operating bills in exchange for a convertible note.

Triangle will continue to operate at its current location and no employees will be lost. Amy Flood, Gilead's manager of communications, told BioWorld Today that with Viread on the market and the company's Hepsera (adefovir dipivoxil) recently approved for hepatitis B, plus a Coviracil launch in the offing, "we're going to need their staff. We have a full plate." (See BioWorld Today, Sept. 24, 2002.)

Upon closing the deal, the merged company will have a total of 1,200 employees working at three U.S. sites and nine locations abroad. The tender offer is expected to be completed in the first half of next year, and the deal should be dilutive to earnings in 2003, neutral in 2004 and accretive in 2005 and beyond, the companies said.

Co-Formulation Work Starts Right Away

The deal is not expected to impact Gilead's goal of obtaining full-year profitability for 2002, John Milligan, the company's chief financial officer, told investors during a conference call. Gilead has more than $625 million in cash reserves and became cash-flow positive in the third quarter, giving it plenty to complete the transaction.

Within five business days the tender offer will commence, and the deal could be finished in eight weeks, he said.

"One of the reasons why we chose to go tender offer was the potential for a very fast close so we could bring these organizations together," Milligan said. The transaction will be subject to review under the Hart-Scott-Rodino Antitrust Improvements Act.

London-based GlaxoSmithKline plc and Bristol-Myers Squibb Co., of New York, "own basically 80 percent of the HIV market, and this could be a great opportunity to offer patients and physicians new options in treatment, but we don't have any further guidance" on the outcome of the HSR review, he added.

Triangle's board has voted to recommend the tender offer and the merger to its stockholders.

Triangle in August disclosed promising results from an ongoing Phase III trial with Coviracil, which is slated for FDA review next year. The drug was part of a potential $335 million deal with Abbott that began in 1999, and Triangle's new drug application was accepted by the FDA in November. A European filing is expected soon. (See BioWorld Today, June 4, 1999, and Aug. 1, 2002.)

John Martin, president and CEO of Gilead, said in the call that the merged company will "immediately start" developing a co-formulation of Coviracil, a nucleoside reverse transcriptase inhibitor, with Gilead's Viread (tenofovir disoproxil fumarate).

The drugs have no overlapping resistance mutations, he noted, which suggests "they would be highly compatible when used in combination. This could result in the first combination product dosed as one pill, once daily."

Norbert Bischofberger, executive vice president of research and development for Gilead, said the co-formulation work is "currently ongoing, but based on the physical chemical properties of both components, we don't anticipate there will be any big challenges in doing that."

The regulatory pathway, he added, is "pretty clear. All we would really need is a CMC [chemistry, manufacturing and controls] package, plus a bioequivalence study to show that the co-formulated tablet gives you the same exposure to the individual components. The work involved is not that much. A bioequivalence study takes four weeks or so."

Studies already are under way testing Coviracil in combination with Viread for HIV, he added. The companies are targeting 2005 to have a co-formulation product on the market.

Martin noted a Phase III trial also is ongoing with Coviracil in chronic hepatitis B, or HBV, and "the treatment paradigm for HBV may mirror that of HIV," making feasible a co-formulation with Hepsera.

End Of Cubist Deal Not A Factor

Other than Hepsera and Viread (approved in the U.S. in October 2001 and in Europe in February), Gilead has four products on the market: AmBisome (liposomal amphotericin B); Tamiflu (oseltamivir phosphate) for influenza; Vistide (cidofovir) for cytomegalovirus retinitis in AIDS patients; and DaunoXome (liposomal daunorubicin) for AIDS-related Kaposi's sarcoma.

Schrader told BioWorld Today that "when Gilead returned Cubist's drug, I knew they were up to something." But Flood said there was no relation between the Cidecin developments and the subsequent merger of Gilead and Triangle.

In September, Gilead and Cubist Pharmaceuticals Inc., of Lexington, Mass., ended a licensing deal for the commercialization of the injectable anti-infective Cidecin (daptomycin), with Cubist saying the two companies differed over the filing options for Cidecin in Europe. (See BioWorld Today, Sept. 11, 2002.)

"Gilead had no pipeline," he said. "There was just nothing there." Triangle's portfolio includes amdoxovir, a nucleoside analogue in Phase II studies for the treatment of HIV, and clevudine, a nucleoside analogue in Phase I/II studies for hepatitis B.

Triangle had the pipeline, Shrader said, but "needed a partner badly."

Triangle company officials could not be reached Wednesday; its offices closed early due to inclement weather.