West Coast Editor

Just more than three months after pumping $25 million into Corus Pharma Inc., Gilead Sciences Inc. - already Corus' largest shareholder - is exercising its option to buy out the firm, at a price tag of $365 million.

At the same time, Gilead is paying an undisclosed amount to Novartis Vaccine and Diagnostics Inc., in order to dismiss ongoing litigation with privately held, venture-backed Corus.

Gilead "recognized that the longer this trial and its likely appeals go on, the more the team would lose their original timeline" for gaining approval of the lead antibiotic, which is "one of the reasons we chose to do this, this week," said John Milligan, Gilead's chief financial officer, during a conference call.

"We do expect to keep those operations up there," he added. "The people are very important for us." Further impact of the acquisition will be disclosed later, he said.

The legal skirmish involves claims by Basel, Switzerland-based Novartis that officials at Corus, of Seattle, had come up with the firm's lead compound, Cayston, while employed by PathoGenesis Corp., also of Seattle, which was acquired by Chiron Corp., of Emeryville, Calif., in 1995. Novartis AG bought Chiron for $1.5 billion this spring.

Cayston (aztreonam lysine), is an inhaled antibiotic due to complete Phase III enrollment later this year. Designated an orphan drug by the FDA, Cayston works against Gram-negative bacteria such as Pseudomonas aeruginosa, which causes infections in patients with cystic fibrosis. The pivotal program is testing the drug as a potential treatment for CF-related pulmonary infections.

San Diego-based Gilead's takeover of Corus, which pulled back its $100 million initial public offering in February, is expected to close this quarter, and means a potentially more diversified pipeline for the already-successful Gilead.

Gilead could use its Tamiflu sales force to market the product, thanks to a recently revised agreement with partner F. Hoffmann-La Roche Ltd., also of Basel, providing Gilead with the option to co-promote Tamiflu (oseltamivir phosphate), a neuraminidase inhibitor for influenza. Roche reported second-quarter Tamiflu sales of CHF360 million (US$289 million), and Gilead gets 22 percent of that, or $65 million.

Due to be the subject of a new drug application as early as next year, Cayston would face two competing therapies in CF: TOBI, the antibiotic from Novartis AG, with annual sales worldwide of about $200 million, and the mucus thinner Pulmozyme (dornase alfa), from Genentech Inc., of South San Francisco.

Cayston, given by way of an electronic jet nebulizer called eFlow, developed by Starnberg, Germany-based PARI GmbH, has the possibly significant advantage of faster administration - at least for now - over TOBI, which Novartis gained in its $1.5 billion buyout of Chiron this spring.

But Forest Laboratories Inc., of New York, has a dry-powder antibiotic for CF in Phase III, and Novartis also is said to be working on a dry powder. Forest has said that its new drug delivery system would be a small, spring-loaded device that gets inhalation time down to about two minutes per day - as compared with the nebulizer route, which can take 20 minutes to 30 minutes, twice per day.

Gilead made news earlier this month with the approval of the first once-daily, triple-drug regimen for HIV-1 patients, developed through a joint venture with New York-based Bristol-Myers Squibb Co. The compound, Atripla, combines Gilead's Truvada, a fixed-dose product comprising Viread (tenofovir disoproxil) and Emtriva (emtricitabine), with BMS' Sustiva (efavirenz). Atripla could draw patients away from London-based GlaxoSmithKline plc's Combivir, which consists of lamivudine and zidovudine. (See BioWorld Today, July 13, 2006.)

It's already happening. Kevin Young, vice president of commercial operations, said during the conference call that about 140,000 patients were taking Combivir when Truvada was launched, and "it's now down to 97,000 people. I think it's a pretty similar dynamic we have going on in the European market," although the drug remains in second place behind Combivir in France.

Participants in the conference call seemed more interested in Gilead's second-quarter earnings, unveiled after the market closed Wednesday, than in the buyout. Citigroup analyst Yaron Werber congratulated Gilead on "a very nice quarter all around."

The report showed revenues up 38 percent over the same period last year to $685.3 million, with net income of $265.2 million, or 56 cents per diluted share. Excluding after-tax stock-based compensation expense, non-GAAP net income for the second quarter was $292.9 million, or 61 cents per diluted share, compared to $196 million, or 41 cents per diluted share for the second quarter of last year.

Product sales hit a record $590.7 million for the second quarter, chalking up 11 consecutive quarters of product sales growth for the firm, driven mainly by the HIV franchise. Truvada sales reached $299.3 million, a jump of 143 percent. Marketing in the U.S. began in the third quarter of 2004 and in the major markets of the European Union during 2005, and in the second quarter of this year, Truvada sales accounted for more than 60 percent of Gilead's total HIV sales.

Viread sales were $167.4 million, a 20 percent decrease from $209.1 million in the second quarter of 2005, as patients switched from that product to Truvada. Emtriva sales, at $8.7 million, dipped 29 percent - again, mainly because of patients switching from an Emtriva-containing regimen to one containing Truvada.

As for newly approved Atripla and its chances for seizing market share, "just like we did with Truvada, we'll have to see how things roll out during the coming months," Young said.

Earnings were released after the market closed Wednesday. Gilead's shares (NASDAQ:GILD) ended the day at $59.35, down $1.88.

Published  July 21, 2006