For hepatitis C, Gilead Sciences (GILD 0.07%) has done a very nice job developing a cocktail drug (with help from its acquisition of Pharmasset). Gilead's Harvoni can cure almost all hepatitis C patients without the need for other medications.

For HIV, however, it's needed a little help.

On Monday, Gilead Sciences announced an expanded agreement with Johnson & Johnson (JNJ -0.69%) to develop two different of cocktail pills to treat HIV. One drug will combine Gilead's tenofovir alafenamide, commonly called TAF, and Emtriva with Johnson & Johnson's Edurant. The other combines Gilead's TAF, Emtriva, and Tybost, along with Janssen's Prezista.

Cocktail pills help eliminate the need for multiple pills. Source: The Motley Fool

The companies already developed a similar cocktail called Complera, which is marketed as Eviplera in the European Union. The drug is a combination of Gilead's Viread along with Emtriva and Edurant.

Gilead is on a quest to swap out Viread for TAF in its medications, because TAF has a longer patent life than Viread. The company also claims that the newer drug is safer, reducing the likelihood of kidney failure and decreases in bone mineral density.

The TAF/Emtriva/Edurant combination is just Complera with TAF instead of Viread, so it should work as well. Gilead will start clinical trials for the new combination shortly, and will be responsible for getting the drug approved and manufacturing and selling the drug in most counties. Johnson & Johnson will distribute the drug in approximately 17 markets, presumably ones where the larger Johnson & Johnson has a presence but Gilead doesn't.

Development of the other drug combination, TAF/Emtriva/Tybost/Prezista, will be taken over by Johnson & Johnson. Under a previous agreement between the companies, Gilead was working on the four-drug combination, which appears to work as well as Viread/Emtriva/Tybost/Prezista in a phase 2 trial.

Johnson & Johnson has had a phase 3 trial listed in since October, so it appears this switch in responsibility has been in the works for awhile and Johnson & Johnson is ready to hit the ground running. The change seems like a good idea, since Johnson & Johnson is responsible for a separate pill that just contains Tybost and Prezista, which it submitted to the FDA in April.

HIV vs. Hep C
Obviously every company would like to keep all of the revenue from its drugs. But sharing works better in HIV than it does for treating hepatitis C, for a couple of reasons.

First, Gilead stumbled on an amazing combination of just two drugs that can cure hepatitis C; most HIV patients are taking three or more medications to keep their infection at bay. It's a lot easier to develop or make acquisitions to get a two-drug combination than one that requires three or four. Gilead's four-drug Stribild is wholly owned, but that's an exception in the HIV space.

Hepatitis C drugs are also a cure, which puts pressure to capture as much revenue as quickly as possible. Except for the rare failure or reinfection, you only get one shot at treating a patient. Capturing all of the revenue is important since the size of the market is in decline as patients are treated.

HIV patients, on the other hand, will be taking drugs for the rest of their lives. Patients become resistant to medications and have to be switched to different combinations. There are also tolerability issues that can cause patients to switch. Having your hand in as many drugs on the market as possible is a good strategy, even if the company isn't capturing the full value of that patient.