Treatment for leukemia and other blood cancers is one of the fastest growing markets in the cancer field. Gilead's last four acquisitions are intended to tap into that market and assure the company's growth for years: in 2012, it bought YM Biosciences; in 2011, Calistoga Pharmaceuticals; in 2010, Arresto Biosciences; and in the same year, CGI Pharmaceuticals.
The science behind blood-cancer treatments has been advancing steadily since 2001, when the leukemia treatment Gleevec, made by Novartis (NYSE:NVS), first proved that precisely aiming drugs at the genetic underpinnings of cancer can work.
In the last year, four drugs have been approved by U.S. regulators to attack various forms of blood cancer, a section of the targeted oncology market that Gilead is aiming at.
Gilead CEO John Milligan said:
"Oncology is entering an era where significant advances are going to be made, far above and beyond what's been made previously. It's a field where there's always the possibility of acquiring other molecules and companies as their technology or pipelines mature. We're certainly keeping our eye on it."
Chronic lymphocytic leukemia, or CLL, is usually diagnosed through a routine blood test.
The disease is characterized by a slow increase in B lymphocytes, causing cancer cells to spread through the blood and bone marrow as well as the lymph nodes, liver, and spleen.
CLL is a slow-growing cancer and many patients do not require treatment until they start having symptoms. The vast majority of patients experience a relapse at some point after initial treatment with chemotherapy or immunotherapy. About 20 percent of patients have so-called refractory disease, meaning that they either relapse within six months or do not respond to initial treatment at all.
According to the National Cancer Institute, approximately 15,680 patients will be diagnosed with CLL, and 4,580 will die from the disease in 2013 in the U.S.
Gilead's experimental drug, Idelalisib, works by blocking PI3 kinase delta, a subtype of the PI3K proteins known to promote tumor growth.
Idelalisib is the first drug that selectively inhibits this PI3K subtype and is designed to reduce proliferation, enhance apoptosis (programmed cell death), and inhibit homing and retention of malignant B cells.
In a Phase 1 trial, Gilead's Idelalisib, also known as GS-1101, produced rapid and durable tumor shrinkage in half of the 54 patients treated with the drug alone, stalling disease progression for an average of 17 months. Participants in the trial had previously received a median of five other treatments.
Gilead had acquired the medicine in its 2011 purchase of Calistoga Pharmaceuticals for $375 million.
Typically, this would be the a beginning of an extended clinical trial process, but Gilead's usual impatience combined with the FDA's new interest in short-circuiting the regular development process, particularly for cancer, may result in a possible approval based on mid-stage data.
Idelalisib is currently in late-stage testing as a treatment for both CLL and indolent, or slow-growing, non-Hodgkin's lymphoma (NHL). Three phase 3 trials are underway studying the efficacy of idelalisib in combination with other agents, specifically Arzerra, made by GlaxoSmithKline (NYSE:GSK), Rituxan from Roche (OTCQX:RHHBY) and a combination of Rituxan and Treanda made by Teva (NYSE:TEVA).
Gilead said recently that it would consider filing for regulatory approval of idelalisib based on pending results from a mid-stage trial involving patients with indolent NHL who had stopped responding to existing therapies. Data from that trial will be presented at an upcoming lymphoma conference in Lugano, Switzerland, in late June.
Wall Street analysts, on average, have forecast sales of nearly $500 million a year by 2017 for the drug, according to Thomson Pharma. The fact that CLL is slow moving has a business side to it: it can possibly require treatment for years, opening up an opportunity for Gilead to earn billions of dollars in revenue from idelalisib.
While Gilead may not have the experience of a Pfizer (NYSE:PFE), Roche, or Novartis in cancer, it sees the cancer drug landscape evolving into something right up its alley.
Gilead is driven by the vision that a cancer diagnosis will become less like a short-term death sentence, and more of a chronic disease that must be managed regularly, like HIV. As DNA sequencing is becoming fast and cheap enough for more doctors to see what's going on with the cancer at a molecular level, patients will be treated with cocktails of drugs aimed at specific molecular targets, through convenient oral pills, that offer mild side effects compared to chemotherapy, said Gilead's chief scientific officer, Norbert Bischofberger.
Gilead's main competitor in the CLL market may be Pharmacyclics Inc. (NASDAQ:PCYC), of Sunnyvale, California, which, in collaboration with Johnson & Johnson (NYSE:JNJ), has an experimental therapy ibrutinib, in the final stage of testing.
In April, the collaboration won its third "breakthrough drug" title from the FDA. This latest regulatory advance was given for their work on patients with chronic lymphocytic leukemia, whose cases are marked by a fatal deletion in chromosome 17, which is typically a death sentence. Ibrutinib is currently involved in a total of 26 clinical trials, out of which 5 are in Phase 3.
Gilead's total revenues in the first quarter of 2013 were $2.53 billion, up 11% from the same quarter last year. Sales of antiviral products, reaching $2.06 billion, were up 7%. That reflected 8% growth in Europe and 7% in the U.S. The company said there was especially strong demand for combo drugs Complera and Stribild, which helped make up for an 8% fall-off of sales of Truvada.
In 2013, Gilead's shares have had an impressive year-over-year gain of nearly 108%, having gained more than 48% since the beginning of the year alone.
While sales of Gilead's HIV drugs increased, the growth in its share price was largely fueled by optimism about its experimental hepatitis C drug, acquired for $10.8 billion last year in the purchase of Pharmasset.
Analysts share that optimism. Twenty-six of 32 analysts have a "buy" rating on the stock with a price target of $44.39, according to data compiled by Bloomberg.
The move into hepatitis C is just one part of a strategic acquisition spree that included the purchase of three blood-cancer companies in the 28 months prior to its December 2012 pickup of YM BioSciences for $510 million. The little-noticed acquisitions should give investors another reason to be positive about the company's growth in the future.
Michael Yee, an RBC Capital Markets analyst in San Francisco, wrote:
"HIV and hepatitis C are going to lead an enormous growth phase from 2014 to 2018 for the company. Meanwhile, Gilead is quietly building a hematology franchise as another additional growth driver to take the company further into the future."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.