Zacks_Analysts' Blog : Gilead's Pact to Fight Cancer - Analyst Blog

Gilead Sciences Inc. (GILD) recently entered into a research collaboration with Yale School of Medicine for discovery of novel cancer therapies. Yale and Gilead scientists will research to find new molecular targets that will help in development of novel cancer therapies by understanding the basis of the disease in a better way.

The collaboration will initially extend for four years during which Gilead will finance $40 million for research support and basic science infrastructure development. Gilead and Yale School of Medicine have the option to renew it for upto ten years. If the collaboration is extended, then Gilead will fund a total of up to $100 million over the ten-year period. Under the terms of the agreement, if Yale succeeds in developing any novel therapy, it will be first licensed to Gilead.

Gilead is aiming to broaden its expertise in the fields of oncology. In February this year, the company inked a deal to acquire privately held biotechnology firm, Calistoga Pharmaceuticals, Inc., which focuses on developing therapies to combat cancer and inflammatory diseases. The acquisition adds CAL-101, Calistoga Pharma’s lead pipeline candidate, to Gilead’s pipeline among others.

CAL-101, currently undergoing mid-stage studies, is being developed to treat patients suffering from refractory indolent non-Hodgkin’s lymphoma. Moreover, the candidate is also being developed as a combination therapy – in conjunction with Roche Holdings Limited’s (RHHBY) Rituxan (rituximab) – for treatment-naive elderly patients suffering from chronic lymphocytic leukemia.

Our Recommendation

Currently, we have a Neutral recommendation on Gilead which is supported by a Zacks #3 Rank (short term hold). We remain optimistic on the growth potential of Gilead’s HIV franchise drugs, Truvada and Atripla, as well its strong HIV pipeline. However, the company’s HIV drugs are facing patent challenges from generic companies. Besides, the issues raised by the FDA regarding contamination at the company’s San Dimas production facility could add further pressure on the company’s top-line. Gilead’s revenues also continue to be unfavorably impacted by pricing pressures in Europe and currency fluctuation.