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Curing from hand to mouth
January 2012
by Jeffrey Bouley  |  Email the author


FOSTER CITY, Calif.—Looking to leverage its infrastructure and expertise in antiviral drug development, manufacturing and commercialization, Gilead Sciences Inc. in November signed a definitive agreement to acquire Princeton, N.J.-based Pharmasset Inc. for $137 per share in cash, which values Pharmasset at approximately $11 billion.  
The acquisition will "greatly accelerate our goal to develop and bring to market oral regimens for the treatment of hepatitis C virus (HCV), regardless of genotype," says Dr. John C. Martin, chairman and CEO of Gilead. "Gilead has become the leading player in the therapeutic area of HIV by developing the best-in-class combination products. These therapies have changed the treatment paradigm for HIV and have gone to market through an effort to increase diagnosis rates and bring more people into care. We believe the same opportunity exists in HCV."  
"Pharmasset's compounds, together with our portfolio of HCV product candidates, which includes compounds with different mechanisms of action and resistance profiles, enables us to evaluate multiple all-oral, interferon-free opportunities," he adds.  
The purchase price represents an 89 percent premium to Pharmasset's closing share price on Nov. 18, the last trading day prior to the companies announcing the signing of the definitive agreement, and was unanimously approved by Pharmasset's board of directors. Gilead plans to finance the transaction with cash on hand, bank debt and senior unsecured notes, and expects the transaction when completed to be dilutive to Gilead's earnings through 2014 and accretive in 2015 and beyond. Further guidance will be provided when the transaction closes, according to Gilead, which is expected to occur in the first quarter of 2012.
Pharmasset currently has three clinical-stage product candidates for the treatment of chronic hepatitis C virus (HCV) advancing in trials in various populations. The company's lead product candidate, PSI-7977, an unpartnered uracil nucleotide analog, has recently been advanced into two Phase III studies in genotype 2 and 3 patients. Both studies will utilize 12 weeks of treatment with PSI-7977 in combination with ribavirin. One study will compare this all-oral regimen against 24 weeks of the standard-of-care pegylated interferon/ribavirin in treatment-naïve patients, and the second study will compare the all-oral regimen to placebo in interferon-intolerant/ineligible patients.
A third Phase III study in genotype 1 patients will be initiated in the second half of 2012, the design of which is dependent on the outcome of Phase II studies that are evaluating PSI-7977 in various combinations in genotype 1-infected patients. If successful, this strategy could lead to an initial U.S. regulatory approval of PSI-7977 in 2014. PSI-938, an unpartnered guanosine nucleotide analog, has been in the process of being tested in a Phase IIb interferon-free trial as monotherapy and in combination with PSI-7977 in subjects with HCV of all viral genotypes. Mericitabine (RG7128), a cytidine nucleoside analog, is partnered with Roche and is being evaluated in three Phase IIb trials. Roche is responsible for all aspects of the development of mericitabine.  
In mid-December, Pharmasset said it would be amending the design of the QUANTUM Phase IIb trial of the guanine nucleotide analog PSI-938 and discontinue all treatment arms with a regimen containing PSI-938. Some 235 individuals with HCV in the study had been receiving treatment with PSI-938 alone or in combination with PSI-7977 or PSI-7977 and ribavirin. During routine safety monitoring, the company detected laboratory abnormalities associated with liver function in subjects receiving PSI-938 at a dosage of 300 mg once daily. These laboratory abnormalities have not been observed in patients receiving PSI-7977 and ribavirin in the QUANTUM study or in other trials evaluating PSI-7977. This change does not, however, trigger the "key product event" clause set forth in section of the merger agreement between Pharmasset and Gilead, so Pharmasset anticipates the transaction will continue to go forward.
Pharmasset made quite a splash in early November when it released Phase II data for PSI-7977 showing a 100 percent cure rate for HCV among the 40 patients in the trial, pushing Pharmasset's stock prices briefly into the mid-70s before dropping back down to around $69.  
This led Canaccord Genuity biotechnology analyst Dr. George Farmer to go bullish and recommend a "buy" on Pharmasset stock, claiming that this study provides "an advance signal of strong proof of concept from the ELECTRON trial, and lending support to our thesis that nucs such as 7977 will represent the backbone of an interferon-free future for HCV therapy."  
However, had a different view on Nov. 8, when Pharmasset's share prices dropped back into the 60s, rating Pharmasset as a "sell" and maintaining that "the company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow and feeble growth in its earnings per share."
Reaction to the acquisition announcement was likewise mixed, with a JPMorgan analyst calling the move "a bold and strategically positive deal" for Gilead. Meanwhile, on a more neutral note, a Stifel Nicolaus analyst called the acquisition "a big bet" that could or could not pay off. On the more pessimistic side was a University of Michigan market-watcher who called the deal an "amazing risk" in which "everything had better work perfectly" for Gilead to come out looking good.  
"We are excited to join together with Gilead, which shares our commitment to providing HCV patients with new, highly efficacious and safe oral therapies," said Schaefer Price, president and CEO of Pharmasset, in a statement. "We are very encouraged by the data from our Phase II studies of PSI-7977 and believe strongly in the potential of this compound to be a component in the transformation of the treatment of chronic HCV. Gilead's established expertise and leadership in the field of antiviral drug development and commercialization, coupled with the company's existing portfolio of promising compounds for HCV, make this partnership an ideal step to fully realize the potential of our promising molecules as part of future all-oral combination therapies for millions of patients in need around the world."

Gilead seeks first-ever approval for drug to prevent HIV  
FOSTER CITY, Calif.—In other news, Gilead Sciences Inc. announced in December that it has submitted a supplemental New Drug Application (sNDA) to the U.S. Food and Drug Administration (FDA) for the approval of once-daily Truvada (emtricitabine/tenofovir disoproxil fumarate) for pre-exposure prophylaxis (PrEP) to reduce the risk of HIV-1 infection among uninfected adults. Truvada was approved by the FDA in 2004 for the treatment of HIV-1 infection and is currently the most-prescribed antiretroviral treatment in the United States, Gilead notes.
If the sNDA is approved, Truvada would be the first agent indicated for uninfected individuals to reduce the risk of acquiring HIV through sex, which is the intent of the PrEP prevention approach. The sNDA is based on the results of two large placebo-controlled trials of Truvada as PrEP, sponsored by the U.S. National Institutes of Health (NIH) and the University of Washington. According to Gilead, several other clinical studies support the use of Truvada for HIV risk reduction.
"The data from these large-scale clinical trials suggest that Truvada may have a role to play in meeting the urgent public health need to reduce new HIV infections," said Dr. John C. Martin, chairman and CEO of Gilead, in a statement. "Gilead is proud to have played a part in helping to define the use of Truvada as a potential new prevention tool and we commend the many institutions, investigators and study volunteers for their commitment to advancing this important area of research."  
According to current Centers for Disease Control and Prevention (CDC) data, each year some 50,000 people are newly infected with HIV in the United States. Despite extensive efforts to prevent infections using existing interventions, the HIV incidence rate has remained steady for many years. More than half of new infections (61 percent) occur among men who have sex with men, and nearly a quarter (23 percent) occur among women.  
Truvada is not currently indicated to reduce the risk of HIV infection.

Code: E011201



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