Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



A Good Fit. On the Surface.

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

On the surface, Gilead Sciences' (Nasdaq: GILD  ) purchase of privately held Arresto Biosciences looks like a good fit.

Arresto's AB0024 is in a phase 1 trial for idiopathic pulmonary fibrosis (IPF), and Gilead has an IPF drug, ambrisentan, in phase 3 trials. At worst, AB0024 acts as a backup compound if ambrisentan fails, and at best, the drug might complement ambrisentan clinically and allow Gilead to flex its IPF sales force against InterMune's (Nasdaq: ITMN  ) Esbriet, which is headed toward an approval in the EU and eventually in the U.S.

A closer look makes you wonder where Gilead is going with the $225 million purchase, though. AB0024 attacks a protein involved in making fibroids that cause IPF, but the protein is also involved in making the matrix that forms around tumors. AB0024 is also being tested against solid tumors.

Remember, Gilead is a company specializing in antiviral drugs. Expanding into heart drugs and IPF seemed reasonable; you can only develop so many compounds for HIV and hepatitis. The number of patients in these indications is relatively small, which can keep sales costs down.

But cancer? Does Gilead really want to get into that highly competitive business? Look at how much its peers spend on hocking their drugs to large markets.


Percent of Revenue Spent on Selling, General, and Administrative Expenses (LTM)



Celgene (Nasdaq: CELG  )


Amgen (Nasdaq: AMGN  )


Source: Capital IQ, a division of Standard & Poor's.

Plus, there's the fact that AB0024 is an antibody, a drug class that Gilead has no experience with.

Who knows -- maybe Gilead will out-license the cancer rights to Celgene, Amgen, or one of the big pharmas. But if this is the future of Gilead, investors would be wise to make sure the new Gilead is still a good fit for their portfolio.

Biotechs too risky for you? Try playing them with options.

Gilead Sciences is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (4)

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1405813, ~/Articles/ArticleHandler.aspx, 10/23/2016 12:34:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
AMGN $158.51 Down -2.99 -1.85%
Amgen CAPS Rating: ****
CELG $98.91 Down -1.11 -1.11%
Celgene CAPS Rating: *****
GILD $74.29 Down -0.02 -0.03%
Gilead Sciences CAPS Rating: *****
ITMN.DL $0.00 Down +0.00 +0.00%
InterMune CAPS Rating: **