EU to Gilead: More Trials for You

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Sometimes companies have to roll the dice. Last September, the Food and Drug Administration turned down Gilead Sciences' (Nasdaq: GILD) aztreonam lysine, a drug to treat bacterial infections in cystic fibrosis patients, but there was still hope for European approval. After all, Schering-Plough (NYSE: SGP) did it; its Bridion was approved in Europe even though the FDA turned it down.

But sometimes snake eyes come up: The European Union's Committee for Medicinal Products for Human Use (CHMP) yesterday recommended against approving aztreonam lysine.

The drug is an inhaled antibiotic with the same active ingredient as Elan's (NYSE: ELN) Azactam, which was originally developed by Bristol-Myers Squibb (NYSE: BMY). Azactam is injected, so Gilead's product is likely to be favored if it's able to gain approval and shows similar response rates. Novartis (NYSE: NVS) is for now benefiting from the lack of additional competition. It sells an inhaled antibiotic, Tobi, that's used to treat infections in cystic fibrosis patients.

Vertex Pharmaceuticals (Nasdaq: VRTX) has a cystic fibrosis drug that's further behind in the clinic, but has shown promising early data, and Gilead's misfortunes will certainly benefit Vertex.

Gilead has already started the trial to satisfy the FDA, which will hopefully be all the drugmaker needs to gain approval in Europe as well.

The drugmaker has been diversifying away from its core HIV franchise and into other areas like cystic fibrosis and heart drugs with its acquisition of CV Therapeutics (Nasdaq: CVTX). While I like the move -- diversification is usually good for companies and investors -- it looks like Gilead is going to have to wait a little while longer for its cystic fibrosis treatment at least.