Why Gilead Stock's Newest Drug Approval Isn't a Gamechanger

Gilead Sciences (NASDAQ: GILD  ) is finally an oncology company. It's been years in the making.

On Wednesday, the biotech got Zydelig approved to treat three different B-cell blood cancers: chronic lymphocytic leukemia, follicular B-cell non-Hodgkin lymphoma, and small lymphocytic lymphoma. All three indications are for patients that have failed a previous treatment. For the latter two, the FDA recommends that patients have failed at least two indications.

While Zydelig won't be competing against first-line treatments, it'll still have competition. Johnson & Johnson (NYSE: JNJ  ) and Pharmacyclics' (NASDAQ: PCYC  ) Imbruvica, for instance, is approved to treat chronic lymphocytic leukemia in those who have received at least one prior treatment. Unfortunately it's a little hard to know which drug worked better because Johnson & Johnson and Pharmacyclics tested Imbruvica in an open-label trial that didn't have a control arm. Gilead tested Zydelig in combination with Roche and Biogen Idec's Rituxan; the combination nearly doubled how long it took for patients' disease to progress compared to Rituxan alone, from 5.5 months to 10.7 months for the combination.

Gilead says there are 200,000 patients in the U.S. with the three blood cancers; capturing just a fraction of them could produce blockbuster sales at a reported monthly price of $7,200.

Zydelig has a boxed warning about the potential for liver toxicity, severe diarrhea, inflammation of the lungs and colon, and intestinal perforation. Normally for a cancer drug, you don't really have to worry about the boxed warnings; cancer patients and their doctors will tolerate severe side effects if it means prolonging life. But these leukemia and lymphomas are slow growing, meaning patients tend to live a long time with the disease, cycling on and off different drugs as they knock back the tumor cells until the tumor becomes resistant to the drug. Given the side effects, doctors may tend to use Zydelig at the end of the treatment, which will limit sales.

One drug makes not an oncology company
Especially for a company like Gilead, which brings in billions in sales of its HIV and hepatitis C drugs.

Investors shouldn't expect an instant blockbuster like Gilead got with Sovaldi. During the first quarter, Pharmacyclics booked $56 million in sales for Imbruvica. While that's not a bad start, especially since the label was only expanded to chronic lymphocytic leukemia in the middle of the quarter, Zydelig isn't going to move the revenue needle in the near term if it has the same kind of launch.

To really become an oncology player -- which comes with more respect from doctors and better margins -- Gilead needs two or three more drugs in its pipeline to play out. Unfortunately, only one of Gilead's other cancer drugs, momelotinib, is in phase 3 development. All of the other compounds are in phase 2 or earlier. 

If Gilead wants to bolster its oncology franchise quickly, its best bet is to acquire a drug already on the market, but finding an unpartnered one at a small drug developer is challenging. The next best option would be licensing a drug that's in phase 3 development and close to regulatory approval. I hear Puma Biotechnology has one that might be for sale.

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream team responsible for this game-changing blockbuster. CLICK HERE NOW.

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 25, 2014, at 10:35 AM, mpr120 wrote:

    Your article is nothing but trying to short and I promise you this I will come after you in court and report you to the sec for BS

Add your comment.

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: 3043123, ~/Articles/ArticleHandler.aspx, 9/4/2015 10:41:49 AM

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...

Brian Orelli

Dr. Orelli is a Senior Biotech Specialist. He has written about biotech, pharmaceutical, and medical device companies for The Motley Fool since 2007.

Today's Market

updated Moments ago Sponsored by:
DOW 16,138.49 -236.27 -1.44%
S&P 500 1,930.56 -20.57 -1.05%
NASD 4,695.42 -38.08 -0.80%

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

9/4/2015 10:25 AM
GILD $102.49 Up +0.58 +0.57%
Gilead Sciences CAPS Rating: *****
JNJ $91.48 Down -1.16 -1.25%
Johnson & Johnson CAPS Rating: ****
PCYC $0.00 Down +0.00 +0.00%