Failure is never fun.
Gilead Sciences (NASDAQ:GILD) announced its first pipeline setback of 2016 in January. The big biotech shut down its phase 2 study of simtuzumab in treating idiopathic pulmonary fibrosis after the drug didn't prove effective. Now Gilead has suffered another clinical failure -- but Gilead's pain is Celgene's (NASDAQ:CELG) gain.
Another one bites the dust
On Sept. 21, Gilead announced that it was terminating the phase 2/3 study of GS-5745 in treating moderately to severely active ulcerative colitis. Much like simtuzumab, GS-5745 proved ineffective.
Gilead had planned for the clinical study to include 1,600 patients. After only 150 patients had received GS-5745, the Data Monitoring Committee recommended stopping the trial. Although no safety concerns were identified, the experimental drug just didn't show sufficient treatment benefit.
While it's the end of the road for GS-5745 in treating ulcerative colitis, other opportunities remain for the anti-MMP9 antibody. Gilead is continuing its phase 3 study of GS-5745 in treating gastric cancer, as well as several phase 2 studies targeting indications including Crohn's disease, rheumatoid arthritis, and cystic fibrosis.
Why Celgene is celebrating
Gilead and Celgene don't compete against each other with any of their products currently on the market. That may have changed, had Gilead's GS-5745 succeeded in the recently canceled trial.
Celgene has its own late-stage ulcerative colitis clinical study in progress. Ozanimod attempts to treat ulcerative colitis by keeping pathologic lymphocytes from migrating to sites of inflammation. Results from a phase 2 study were encouraging. Significantly more patients receiving ozanimod showed histologic improvement after eight weeks and after 32 weeks than did patients receiving a placebo. A greater number of patients taking ozanimod also experienced histologic remission after 32 weeks than did patients on placebo.
Does Gilead's failure really help Celgene? Yes. Ulcerative colitis treatment is something of a crowded field, with drugs already on the market and in development. The less competition ozanimod has, the better off Celgene is.
Celgene thinks ozanimod -- which it picked up with the Receptos acquisition last year -- could reach peak annual sales of $4 billion to $6 billion. That estimated range includes the drug's other targeted indication, multiple sclerosis. The ulcerative colitis market could be big for Celgene, though, since ozanimod is taken orally instead of by injection or infusion, like current leading drugs Humira and Remicade.
Biotech rock stars
While Gilead and Celgene won't compete against each other in ulcerative colitis, a clash could still be on the way. Gilead's filgotinib and GS-5745 are in phase 2 testing for Crohn's disease. Celgene's ozanimod is in phase 2 testing for the same indication.
Celgene already has Vidaza on the market as a treatment for acute myeloid leukemia (AML) plus other AML candidates in its pipeline. Gilead's potential AML drug, entospletinib, is in phase 2 testing.
These two companies, which are both biotech rock stars that have created big returns for shareholders in recent years, will likely go head to head -- eventually. In the meantime, Gilead should continue its domination in HIV treatment and remain a major player in hepatitis C. I expect the company will also emerge as a leader in nonalcoholic steatohepatitis (NASH) treatment. Celgene, meanwhile, should retain its strong position in treating blood cancers and should be a pacesetter in the inflammation and immunology market.
Gilead will likely experience more clinical failures down the road. So will Celgene. I suspect, though, that the pains for investors holding either of these two biotech stocks will be far smaller than the gains they enjoy over the long run.