Gilead's Long-Term Cancer Fight

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It's official. For better or worse -- we'll know in five to 10 years -- Gilead Sciences (Nasdaq: GILD  ) is a cancer drug company.

The traditional HIV drug powerhouse has been not-so-slowly bringing cancer drugs into the fold. Late last year, Gilead acquired Arresto Biosciences and last month it bought Calistoga Pharmaceuticals.

Now Gilead has established a research partnership with Yale University. The company will provide $40 million for the first four years, which could be upped to $100 million if the partnership is extended for up to 10 years. Gilead will get the first right of refusal for any drugs that are developed through the collaboration.

As they say, "You're not a real drug developer unless you have a partnership with a university for basic research."

OK, so no one actually says that. But they should.

Gilead joins the big boys in going back to school. Pfizer (NYSE: PFE  ) has a collaboration with seven New York hospitals and the University of California, San Francisco. sanofi-aventis (NYSE: SNY  ) also has a separate collaboration with UCSF. And Sanford-Burnham Medical Research Institute is getting funding for research on Alzheimer's disease and major psychiatric disorders from Johnson & Johnson (NYSE: JNJ  ) .

This is a long-term commitment to cancer drugs by Gilead -- not just because the collaboration could go on for a decade, but because anything that comes out of the research will presumably be pre-clinical-trial-stage compounds. It's going to take a long time for them to work their way through development.

Gilead is clearly committed to the move into oncology. While I like the enthusiasm, and the company has money to burn, I wonder if cancer is really the best niche for Gilead. It's a competitive space with a disease that isn't very forgiving in clinical trials.

At this point, investors can't do much but watch and wait; it'll be years before we know if Gilead was able to duplicate the success it's had in HIV drugs.

Follow Gilead as it diversifies into a cancer drug company. Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on Gilead.

Johnson & Johnson and Pfizer are Motley Fool Inside Value picks. Gilead Sciences is a Motley Fool Stock Advisor pick. Johnson & Johnson is a Motley Fool Income Investor choice. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. The Fool owns shares of Johnson & Johnson. Motley Fool Alpha LLC owns shares of Johnson & Johnson. 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.

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  • Report this Comment On April 01, 2011, at 7:31 AM, wjcoffman wrote:


    Where would Gilead's money be of better use? Reinvesting in what it knows (AIDS)? Return to investors as dividends or share buybacks? I would have liked to have read your thoughts on that instead of merely wondering aloud if the company was doing the right thing. Your writing this article shows you have knowledge of the subject matter. Thank you.

    Long Gilead

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