West Coast Editor

Largely on the strength of its HIV franchise, Gilead Sciences Inc. reported a 55 percent income hike for the third quarter, but the company said beginning work on two more potential drugs for the virus will be stopped because of experimental results that have been less than encouraging.

"They were both early stage," noted Amy Flood, director of public affairs for San Diego-based Gilead. The company's stock (NASDAQ:GILD) closed Friday at $33.25, down $3.43. Earnings and the other news were disclosed after the regular trading period Thursday.

The pair of discontinued projects involve the protease inhibitor GS 9005 and GS 7340, a prodrug of tenofovir, the active agent in Viread. A Phase I/II viral dynamics study with GS 9005 failed to win sufficient antiviral response, and an earlier Phase I study found the drug had low bioavailability. GS 7340, also in Phase I/II trials, turned out to lack a profile that differentiates it enough to support more development.

Gregory Wade, analyst with Pacific Growth Equities in San Francisco, cited "some concern on the part of The Street that Gilead will now have to do an acquisition or expensive in-licensing to fill out the pipeline."

The third-quarter report alone might have been discouraging to some investors, Wade told BioWorld Today.

"Sales were a little lighter than we expected, but that was likely due to changes in inventory in the channel," he said. Wall Street seemed to view the situation otherwise, despite reassurances from Gilead during a conference call, he added, pointing out that the stock "traded off pretty significantly in the aftermarket and then again when [the market] opened."

Wade, who owns a small number of Gilead shares and whose firm makes a market in the company, said he didn't understand investor skepticism about inventory glitches. "If you're not going to believe management, then you should take another look at why you own the stock," he said.

He conceded that sales outside the U.S. were "less than stellar" compared to the second quarter, but said the second quarter was exceptionally strong.

Revenues for the fourth quarter totaled $326.2 million, topping the estimate by Pacific Growth, which had targeted $319.3 million. The HIV franchise, which includes Viread (tenofovir disoproxil fumarate), Emtriva (emtricitabine) and Truvada (a combination of the other two), pulled in $228.1 million, just under Pacific Growth's $229.3 million forecast.

Ambisome (amphotericin B) for systemic fungal infections brought in $49.8 million and sales of Hepsera (adefovir dipivoxil) for hepatitis B were $29.7 million. Earnings per share for the quarter came to 25 cents. For the HIV therapies, Gilead's management upped full-year revenue guidance, targeting the range of $875 million to $890 million (up from $850 million to $875 million), and it expects to make $195 million to $205 million from Ambisome.

Gilead said it anticipates spending $210 million to $220 million on research and development, which includes spending on its recently signed collaboration for hepatitis C drugs with Genelabs Technologies Inc., of Redwood City, Calif. (See BioWorld Today, Oct. 1, 2004.)

Flood said Gilead has more HIV compounds in preclinical development and will be moving those along. At the same time, HBV research - though it gets less press than the company's work in HIV and HCV - is significant to the firm, she told BioWorld Today.

"Hepsera is a very important product," she said.

Emtriva has shown anti-HBV properties, and "we know from our own studies and from [other] investigators' studies that in patients co-infected with HIV and HBV, Viread has antiviral activity."

Wade said Hepsera is "doing pretty good," although HBV is "not, I think, in the front of investors' minds."