Curing from hand to mouth

Gilead Sciences acquires Pharmasset for $11 billion in hopes of more quickly advancing oral, non-interferon treatments for HCV

Jeffrey Bouley
FOSTER CITY, Calif.—Looking to leverage its infrastructureand expertise in antiviral drug development, manufacturing andcommercialization, Gilead Sciences Inc. in November signed a definitiveagreement to acquire Princeton, N.J.-based Pharmasset Inc. for $137 per sharein cash, which values Pharmasset at approximately $11 billion.
 
 
The acquisition will "greatly accelerate our goal to developand 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 bydeveloping the best-in-class combination products. These therapies have changedthe treatment paradigm for HIV and have gone to market through an effort toincrease diagnosis rates and bring more people into care. We believe the sameopportunity exists in HCV."
 
 
"Pharmasset's compounds, together with our portfolio of HCVproduct candidates, which includes compounds with different mechanisms ofaction and resistance profiles, enables us to evaluate multiple all-oral,interferon-free opportunities," he adds.
 
 
The purchase price represents an 89 percent premium toPharmasset's closing share price on Nov. 18, the last trading day prior to thecompanies announcing the signing of the definitive agreement, and wasunanimously approved by Pharmasset's board of directors. Gilead plans tofinance the transaction with cash on hand, bank debt and senior unsecurednotes, and expects the transaction when completed to be dilutive to Gilead'searnings through 2014 and accretive in 2015 and beyond. Further guidance willbe provided when the transaction closes, according to Gilead, which is expectedto occur in the first quarter of 2012. 
 
Pharmasset currently has three clinical-stage productcandidates for the treatment of chronic hepatitis C virus (HCV) advancing intrials in various populations. The company's lead product candidate, PSI-7977,an unpartnered uracil nucleotide analog, has recently been advanced into twoPhase III studies in genotype 2 and 3 patients. Both studies will utilize 12weeks of treatment with PSI-7977 in combination with ribavirin. One study willcompare this all-oral regimen against 24 weeks of the standard-of-carepegylated interferon/ribavirin in treatment-naïve patients, and the secondstudy will compare the all-oral regimen to placebo ininterferon-intolerant/ineligible patients. 
 
A third Phase III study in genotype 1 patients will beinitiated in the second half of 2012, the design of which is dependent on theoutcome of Phase II studies that are evaluating PSI-7977 in variouscombinations in genotype 1-infected patients. If successful, this strategycould 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 beingtested in a Phase IIb interferon-free trial as monotherapy and in combination withPSI-7977 in subjects with HCV of all viral genotypes. Mericitabine (RG7128), acytidine nucleoside analog, is partnered with Roche and is being evaluated inthree Phase IIb trials. Roche is responsible for all aspects of the developmentof mericitabine.
 
 
In mid-December, Pharmasset said it would be amending thedesign of the QUANTUM Phase IIb trial of the guanine nucleotide analog PSI-938and discontinue all treatment arms with a regimen containing PSI-938. Some 235individuals with HCV in the study had been receiving treatment with PSI-938alone or in combination with PSI-7977 or PSI-7977 and ribavirin. During routinesafety monitoring, the company detected laboratory abnormalities associatedwith liver function in subjects receiving PSI-938 at a dosage of 300 mg oncedaily. These laboratory abnormalities have not been observed in patientsreceiving PSI-7977 and ribavirin in the QUANTUM study or in other trialsevaluating PSI-7977. This change does not, however, trigger the "key productevent" clause set forth in section of the merger agreement between Pharmassetand Gilead, so Pharmasset anticipates the transaction will continue to goforward. 
 
Pharmasset made quite a splash in early November when itreleased Phase II data for PSI-7977 showing a 100 percent cure rate for HCVamong the 40 patients in the trial, pushing Pharmasset's stock prices brieflyinto the mid-70s before dropping back down to around $69.
 
 
This led Canaccord Genuity biotechnology analyst Dr. GeorgeFarmer to go bullish and recommend a "buy" on Pharmasset stock, claiming thatthis study provides "an advance signal of strong proof of concept from theELECTRON trial, and lending support to our thesis that nucs such as 7977 willrepresent the backbone of an interferon-free future for HCV therapy."
 
 
However, TheStreet.com had a different view on Nov. 8, whenPharmasset's share prices dropped back into the 60s, rating Pharmasset as a"sell" and maintaining that "the company's weaknesses can be seen in multipleareas, such as its deteriorating net income, weak operating cash flow andfeeble 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 positivedeal" for Gilead. Meanwhile, on a more neutral note, a Stifel Nicolaus analystcalled the acquisition "a big bet" that could or could not pay off. On the morepessimistic side was a University of Michigan market-watcher who called thedeal an "amazing risk" in which "everything had better work perfectly" forGilead to come out looking good.  
 
"We are excited to join together with Gilead, which sharesour commitment to providing HCV patients with new, highly efficacious and safeoral therapies," said Schaefer Price, president and CEO of Pharmasset, in astatement. "We are very encouraged by the data from our Phase II studies ofPSI-7977 and believe strongly in the potential of this compound to be acomponent in the transformation of the treatment of chronic HCV. Gilead'sestablished expertise and leadership in the field of antiviral drug developmentand commercialization, coupled with the company's existing portfolio ofpromising compounds for HCV, make this partnership an ideal step to fullyrealize the potential of our promising molecules as part of future all-oralcombination therapies for millions of patients in need around the world." 
 


Gilead seeksfirst-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 ofonce-daily Truvada (emtricitabine/tenofovir disoproxil fumarate) for pre-exposureprophylaxis (PrEP) to reduce the risk of HIV-1 infection among uninfectedadults. Truvada was approved by the FDA in 2004 for the treatment of HIV-1infection and is currently the most-prescribed antiretroviral treatment in theUnited States, Gilead notes.
 
If the sNDA is approved, Truvada would be the first agentindicated for uninfected individuals to reduce the risk of acquiring HIVthrough sex, which is the intent of the PrEP prevention approach. The sNDA isbased 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 ofWashington. According to Gilead, several other clinical studies support the useof Truvada for HIV risk reduction.
 
"The data from these large-scale clinical trials suggestthat Truvada may have a role to play in meeting the urgent public health needto reduce new HIV infections," said Dr. John C. Martin, chairman and CEO ofGilead, in a statement. "Gilead is proud to have played a part in helping todefine the use of Truvada as a potential new prevention tool and we commend themany institutions, investigators and study volunteers for their commitment toadvancing this important area of research."
 
 
According to current Centers for Disease Control andPrevention (CDC) data, each year some 50,000 people are newly infected with HIVin the United States. Despite extensive efforts to prevent infections usingexisting interventions, the HIV incidence rate has remained steady for manyyears. More than half of new infections (61 percent) occur among men who havesex with men, and nearly a quarter (23 percent) occur among women.
 
 
Truvada is not currently indicated to reduce the risk of HIVinfection.


Jeffrey Bouley

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