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hortly after the turn of the century, Gilead Sciences took a hard
look at itself. It had recently purchased NeXstar Pharmaceuticals
for about $550 million and had several programs in oncology. In
early 2001, it had also in-licensed European rights to Cidecin, an
injectable anti-infective from Cubist Pharmaceuticals in Lexington,
Massachusetts. But what Gilead really needed, management was
beginning to think, was a one-pill combination HIV drug.
After all, some patients were taking as many as 20 pills a day and
Gilead had a highly regarded nucleoside analog HIV-1 reverse tran-
scriptase inhibitor (NRTI), Viread (tenofovir disoproxil fumarate),
that was well suited for co-formulation. If Viread, which would be
launched in the last quarter of 2001, could be combined with another
NRTI—well, given the problems with patient compliance and drug
resistance, the upside was huge.
So Gilead refocused and began streamlining. In 2001, it offloaded
its remaining oncology assets and a facility in Boulder, Colorado, to
OSI Pharmaceuticals of Melville, New York, for $200 million in cash
and stock. A year later, it returned Cidecin (daptomycin) rights to
Cubist and then went hunting for a complementary HIV product, set-
tling on Coviracil (emtricitabine), a one-pill, once-daily nucleoside
analog therapy with a nonoverlapping resistance profile with Viread,
developed by cash-strapped biotech Triangle Pharmaceuticals. After
failing to secure a partnership, Gilead bought the company outright
for $525.2 million.
When the acquisition went through, Gilead renamed Coviracil
Emtriva and launched it as a stand-alone product in July 2003.
Though sales were modest (Table 1), Emtriva added layers to Gilead’s
HIV portfolio. The combined-dose pill of Emtriva and Viread,
launched as Truvada in third-quarter 2004, brought in $68 million
that year, then sales exploded (Table 1). In 2008, Truvada brought
in $2.1 billion.
Gilead didn’t stop there. It approached New York-based Bristol-
Myers Squibb (BMS) and leveraged Emtriva to launch Atripla—a
combination of Truvada and BMS’s Sustiva (efavirenz)—in July 2006.
That 3-in-1 pill brought Gilead nearly $1.6 billion in 2008.
The Triangle acquisition, then, made possible 79% of Gilead’s
$5.08 billion overall revenue in 2008. And, in hindsight, $525.2 mil-
lion is a paltry sum compared with what Gilead has since reaped.
The Gilead case contrasts with many other mergers in the biotech
and pharmaceutical sectors. Studies of mergers of $500 million or
more, involving small or large firms, have found little evidence that
acquisition improves firm performance
. And, all too often, returns
are less than expected, to shareholders’ chagrin
For example, MedImmune, of Gaithersburg, Maryland, bought
Aviron for about $1.5 billion (at the time of purchase) in 2002. The
attraction was Aviron’s FluMist, a live, attenuated, cold-adapted
influenza vaccine delivered by nasal mist. MedImmune claimed the
buyout would “diversify and expand” its revenue base—the opposite
Gilead’s deal of a lifetime
Gilead Sciences’ ascent to the upper echelon of biotech centered around one very savvy acquisition that launched an
strategy from Gilead’s complementary purchase. But FluMist never
paid off. Launched in September 2003, FluMist brought MedImmune
just $111 million in sales revenue through 2006. (MedImmune was
acquired by AstraZeneca in 2007.)
Genzyme’s $600 million bid for Sangstat in 2003 fared better. The
crown jewel here was the antibody Thymoglobulin (anti-thymocyte
globulin) for acute rejection in patients with a renal transplant,
although Sangstat also had a second approved transplant product,
Lymphoglobuline (equine anti-thymocyte globulin). But Sangstat
also provided a pipeline of immune-suppression and immunology
products, which meshed well with Genzyme’s research in immune-
Genzyme has expanded Thymoglobulin nicely: it recorded sales of
about $30 million from its transplant products in 2003, and increased
that to $192 million in 2008. With those numbers, the acquisition has
paid for itself, and thus can been seen as a success. But at heart, this
was a company buying a revenue stream. And although that’s one
clear way of attempting growth, Gilead’s decision to go for synergy
with an existing product has paid greater dividends.
Gilead’s Triangle purchase was a calculated move to improve and
optimize its existing technology and portfolio, and it brought Gilead
face to face with incumbents GlaxoSmithKline, Merck and Roche in
the HIV space. That battle for mindshare with big pharma translated
into significant market share. It’s estimated that close to 60% of
people with HIV in the US or Europe use at least one of Gilead’s four
HIV drugs. For new patients, that number may reach 80%.
The increased sales have subsequently given Gilead the muscle to
diversify through acquisition. It purchased in 2006 Corus Pharma and
its inhaled antibiotic, aztreonam lysine, for $365 million, and then
Myogen for $2.5 billion, bringing aboard ambrisentan, an endothelin
receptor antagonist for pulmonary arterial hypertension. Financially
strong, Gilead is a new type of specialized biotech company, and
pound for pound, more productive than most big pharmas.
We are grateful to Jeff Bird, Mark Schoenebaum, Sharon Seiler and Jason Zhang for
insights in drafting this article.
1. Danzona, P.M. et al. Manage. Decis. Econ. 28, 307–328 (2007).
2. Lim, T.M. The Impact of Mergers and Acquisitions on Shareholder Value: A Study
within Biotechnology and Pharmaceuticals Industries in the United States in the Long
Run. Msc. Thesis (Cranfield University, School of Management, 2006).
Table 1 Gilead’s stable of thoroughbred products
Drug sales ($ millions)
Drug 2004 2005 2006 2007 2008
58 47 36 31.5 31.1
88 568 1,200 1,600 2,100
N/A N/A 205 903.4 1,570
Emtriva launched July 2003.
Atripla was launched in July 2006. N/A, not applicable.
Brady Huggett is Business Editor & Christopher Scott is Contributing
© 2009 Nature America, Inc. All rights reserved.