In November 2011 Gilead Sciences purchased Pharmasset for $11.2 billion and gained a stronger foothold in the highly competitive hepatitis C therapeutics market. At the time, this acquisition was the highest price ever paid for a clinical-stage biotech company.
Gilead was especially interested in Pharmasset’s lead candidate PSI7977, an oral uracil nucleotide analog that was in Phase III trials for hepatitis C. PSI7977 later became know as sofosbuvi, which was used in combination with ledipasvir to create Harvoni. Harvoni was approved by the FDA in 2014 and in 2016 enjoyed revenue of over $9 billion, the second highest selling drug. Sofosbuvi as a standalone drug known as Sovaldi generated $4 billion in 2016. (In 2017 sales of these two drugs were declining.)
A few weeks ago on August 28, Gilead announced it planned to buy Kite Pharma, another clinical stage company. This time the price tag would be $11.9 billion. Kite is developing immunotherapy products using engineered autologous therapy to restore an immune system's ability to recognize and eradicate cancer tumors. Kite has asked the FDA to approve its leading treatment known as axi-cel.
Gilead had surpassed its own record in what it had paid for a clinical stage drug company. Gilead's recent deal raises some vital questions. For example:
Gilead was especially interested in Pharmasset’s lead candidate PSI7977, an oral uracil nucleotide analog that was in Phase III trials for hepatitis C. PSI7977 later became know as sofosbuvi, which was used in combination with ledipasvir to create Harvoni. Harvoni was approved by the FDA in 2014 and in 2016 enjoyed revenue of over $9 billion, the second highest selling drug. Sofosbuvi as a standalone drug known as Sovaldi generated $4 billion in 2016. (In 2017 sales of these two drugs were declining.)
A few weeks ago on August 28, Gilead announced it planned to buy Kite Pharma, another clinical stage company. This time the price tag would be $11.9 billion. Kite is developing immunotherapy products using engineered autologous therapy to restore an immune system's ability to recognize and eradicate cancer tumors. Kite has asked the FDA to approve its leading treatment known as axi-cel.
Gilead had surpassed its own record in what it had paid for a clinical stage drug company. Gilead's recent deal raises some vital questions. For example:
- How can we characterize sweet spots for acquiring a biotech company from the perspective of an ultimate revenue/price-paid ratio? What are key metrics to consider when evaluating innovation risk in the biopharma space?
- What is the ratio between highly successful drugs that were internally developed and those being acquired? How is this ratio changing over time?
- Do the deal paths for highly successful drugs differ from a cognate set that failed to achieve significant market success?
- Do deal patterns for top biologics differ from those of small molecule compounds? Are drug combinations more successful for biologics?
- How does an existing competitive environment for a given drug influence successful deal patterns?
We appreciate that these are complex questions. In future blog postings we hope to shed insight on the corporate development paths of highly successful, top 100 selling drugs.
Research assistance provided by Katie Fitzgerald
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