its drugs could be worth, since researchers are still trying to figure out which diseases the drug might be most useful. But Calistoga’s lead compound did show some compelling ability to keep tumors in check for patients with chronic lymphocytic leukemia and indolent “slow-growing” non-Hodgkin’s lymphoma in a study of 177 patients, which was presented in December at the American Society of Hematology. Data hounds can see more of the details here in this Calistoga presentation at the JP Morgan Healthcare Conference—particularly the waterfall charts on page 16 and 20.
One analyst, Thomas Wei of Jefferies & Co., disagreed with the market reaction yesterday, saying he was impressed with the strategic move: “While we continue to believe the new HIV combo pills may fall short of expectations and expect the stock to remain range-bound, we are impressed by today’s acquisition of a promising asset and see it as a step in the right direction towards building long-term shareholder value,” Wei wrote yesterday in a note to clients.
Gilead envisions the Calistoga drugs becoming useful for specific kinds of blood cancers, and for inflammatory diseases that are partly driven by overactive proteins in what is known as the PI3 kinase pathway. Gilead was won over the by the data it saw from Calistoga’s first clinical trial in cancer, and it sees more potential in inflammatory diseases based on other published research, Bischofberger says.
While $600 million might sound like a lot of money to you and me, Bischofberger made it sound like chump change. The company generated more than $720 million in cash flow in the fourth quarter alone, meaning it can afford to buy a company like Calistoga without doing any leveraged financial contortions. The company’s cash horde—which stood at $5.3 billion heading into this year—will be used to invest in the company’s pipeline, buy back shares to boost the stock price, and to obtain the rights to promising new drugs like the one from Calistoga, Bischofberger says. People should expect Gilead to continue building out its cancer drug portfolio, Bischofberger says.
Whether this will pay off, both scientifically and financially, we won’t know for a few more years. But Gilead is betting it will know before the HIV patents start expiring and opening the floodgates to cheap generic competitors in its core franchise.
“We think we have a few pieces in place,” with its cancer strategy, Bischofberger says.
