Gilead Gets Synergistic

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It's always easier to market a drug for a niche indication when a drugmaker produces other treatments for the same rare condition. Yesterday, Gilead Sciences (Nasdaq: GILD) announced that it had acquired a new early-stage pipeline candidate to complement its already-approved pulmonary arterial hypertension (PAH) treatment Letairis.

Borrowing from BioMarin's (Nasdaq: BMRN) playbook, Gilead in-licensed a compound named cicletanine, which it will advance into phase 2 testing as a potential treatment for PAH later this year. Gilead acquired the drug candidate from privately held Navitas Pharma on the cheap; it didn't even have to disclose the financial terms of the deal, which means the purchase was immaterial to Gilead's operations.

Gilead will only own the U.S. rights to cicletanine; the drug has long been approved in the European Union, and it's now off-patent. Even if Gilead can get cicletanine approved in the U.S., it will likely only be able to wring sales out of the compound for the seven years of marketing exclusivity that the FDA's orphan drug designation allows. It will also likely face some indirect competition on the drug as well.

In Gilead's favor, it already has a marketing team in place for Letairis, which it acquired two years ago and received marketing approval for last year. That spares the company an expensive salesforce build-out, should cicletanine make it to market. Those low incremental costs probably explain why Gilead would even pursue this deal at all.

Letairis generated $20 million in first-quarter sales, in the face of a growing PAH market opportunity. Nearly all the major drugmakers in the PAH space are trying to expand the potential patient populations for their approved drugs; acquiring new compounds to treat the disease helps this effort.

Actelion, Pfizer (NYSE: PFE), and United Therapeutics (Nasdaq: UTHR) have all been building out their PAH drug franchises in recent years. Cicletanine could help Gilead compete against these rivals and their expanding pipelines. Whatever the outcome of the company's cicletanine studies, this looks like a low-risk, moderate-potential-reward investment.