Gilead Sciences, Inc.
Gilead Sciences, Inc.
Sales: $233.80 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: GILD
NAIC: 325414 Biological Product (Except Diagnostic) Manufacturing; 541710 Research and Development in the Physical, Engineering, and Life Sciences
Gilead Sciences, Inc. is a biotechnology company specializing in developing and marketing drugs to treat antiviral diseases. Gilead’s primary focus is in developing treatments for the human immunodeficiency virus (HIV), a virus that causes acquired immune deficiency syndrome (AIDS) and infections related to AIDS. The company markets Vistide, used to treat eye infections, and Viread, an HIV treatment. Aside from its work related to HIV and AIDS, Gilead also markets a drug to treat the flu, a pharmaceutical marketed by the company as Tamiflu, and a drug to treat fungal infections, which is marketed under the name AmBisome.
Gilead drew its strategic focus from its founder, Michael Riordan. Riordan, who started Gilead when he was 29 years old, earned his medical degrees from Johns Hopkins University and Harvard. With his degrees in hand, Riordan entered the realm of finance, a seemingly incongruent career choice that proved indispensable to Gilead’s financial well-being. Riordan spent a year working for Menlo Ventures, learning the vagaries of venture capitalism. As his success in finding funding for Gilead would reflect, Riordan proved to be an adept venture capitalist. Gilead, as a pharmaceutical developer, would require substantial amounts of capital to finance its research, capital that could not be recouped for years, perhaps even decades. Riordan directed the company’s research toward the discovery of drugs designed to cure or to mitigate the effects of viral diseases, particularly sexually transmitted diseases (STDs), and notably the most notorious of all STDs, HIV. For the name of his company, Riordan drew his inspiration from the history of the ancient Middle East, where a region known as Gilead gained recognition for a medication called the balm of Gilead, considered the world’s first genuine pharmaceutical product.
Riordan founded Gilead in June 1987. The following year he raised $2 million from his venture capitalist sources. With the infusion of capital, Riordan moved the company to Foster City, California, where Gilead scientists focused their efforts on developing Pharmaceuticals to fight viral diseases, cardiovascular disease, and cancer. The company’s research centered on what were known as “anti-sense” drugs, which were believed to have the potential to block the genetic messages that trigger disease. The field was promising but, like all business pursuits characterized as promising, the financial rewards were speculative. Riordan was gambling on future discoveries and future rewards.
In 1989, a year after Riordan raised $2 million to finance Gilead’s relocation to Foster City, he succeeded in raising $10 million in venture capital. Gilead did not generate any revenues, as expected, until the end of its fiscal year in March 1991. For the year, the company collected $1.3 million in revenue, but the first-time gross was offset by a $4 million loss. Financially, Gilead’s progress was bleak during its formative decade of existence. The company posted annual losses consistently, but the red ink did not dissuade venture capitalists from banking on the promise of Gilead’s pharmaceutical discoveries gaining entry into the market. In September 1991, Riordan secured $20 million in private equity financing, bolstering Gilead’s research and development coffers. The $20 million private placement was part of the more than $40 million Riordan secured from financial institutions, a figure that included funds received from the company’s partnership with the respected $3.5 billion English drug conglomerate Glaxo Holdings PLC. From Glaxo, Gilead received $8 million to develop genetic code-blockers to combat cancer.
Several months after securing $20 million in private equity financing, Riordan began preparing for Gilead’s debut in the public spotlight. In December 1991, the company filed with the Securities and Exchange Commission for its initial public offering (IPO). The IPO was slated to be completed in January 1992, at which point the company hoped to raise $42 million. As Riordan prepared to turn to Wall Street as a source of research and development capital, Gilead scientists were hard at work developing small molecule antiviral therapeutics, research that was based on nucleotide compounds that had been licensed from two European academic laboratories. Toward the end of January 1992, Gilead completed its IPO, an offering that resulted in $86.25 million in proceeds. The investing public appeared willing to take a gamble on Gilead’s future success. Gilead’s IPO would not be the last time Riordan turned to Wall Street for cash.
Roughly six months after Gilead’s debut on the NASDAQ, the company had yet to introduce a pharmaceutical product. Instead, revenue was derived from research and development projects conducted in partnership with other parties. The company’s work to combat cancer, undertaken at the behest of Glaxo, represented one such project. By mid-1992, the company also was working on a program tied to the U.S. Defense Department’s Advanced Research Projects Agency. Under the specifications of the project, Gilead scientists were charged with developing drugs to combat malaria, Dengue fever, and other tropical diseases. Of particular importance during this juncture of the company’s history was its work on CMV retinitis, an AIDS-related eye disease. During the first half of 1992, Gilead filed an investigational new drug application with the U.S. Food and Drug Administration (FDA) covering a compound, cidofovir injection, for the treatment for CMV retinitis. The compound was branded as Vistide by Gilead, a product that would figure prominently in the company’s future.
In 1995, after waiting eight years and spending $93.3 million on drug research and development, Gilead was ready to introduce its first product on the market. The company applied to the FDA for approval of Vistide in October 1995, which, when approved by the FDA, would thrust Gilead into a market estimated to be worth $150 million in annual revenue. In December 1995, the company submitted an equivalent application to the European Medicines Evaluation Agency. Vistide, according to the company’s claims, represented a breakthrough, one that potentially could increase the size of the CMV retinitis market. Unlike the other treatments available on the market, foscarnet and ganciclovir, which required surgically inserted catheters, Vistide was administered intravenously. His long wait nearly over, Riordan hoped to obtain FDA approval within six months, setting the stage for Vistide’s debut in the U.S. market for late 1996.
As expectations rose for the introduction of Vistide, Gilead had yet to generate any profits. During fiscal 1995, it generated $4.9 million in revenue thanks to its collaborative relationship with Glaxo, but otherwise the financial highlights of Gilead’s first eight years of business were nonexistent. Despite the seemingly precarious position held by Gilead, Riordan found himself surrounded by money. A secondary public offering in August 1995 raised $94.2 million, giving the company’s founder and chief executive officer nearly $160 million to use to market Vistide and Gilead’s other antiviral drugs.
1996: The Debut of Vistide
As Gilead braced itself for the market introduction of Vistide and while it tended to the development of the other drugs in its portfolio, the desire for additional cash did not abate. In February 1996, the company completed its fourth public offering, issuing four million shares of stock that yielded net proceeds of $162.5 million. The stockpiled financial resources found expression in June 1996, when the FDA gave its nod of approval. The federal agency gave its approval of Vistide’s use for the treatment of CMV retinitis in patients suffering from AIDS, triggering a quick response from Gilead’s Roster City headquarters. Within hours of the FDA’s approval, the company began shipping Vistide to wholesaler and specialty distributors nationwide, with sales spearheaded by a network of agents Gilead referred to as “Antiviral Specialists.” One month later, the company prepared for a similar rollout of Vistide in foreign markets, signing an agreement with pharmaceutical giant Pharmacia & Upjohn to market the AIDs-related blindness drug in all markets outside the United States.
From our inception, the people of Gilead across the United States, Europe and Australia have shared a vision of advancing therapeutics for life-threatening diseases worldwide. As a leading biopharmaceutical company, we have been fulfilling that vision for more than a decade —discovering, developing and commercializing small molecule therapeutics to advance the care of patients suffering from life-threatening infectious diseases.
During the latter half of the 1990s, Gilead’s legitimacy as a drug developer increased, as its claims of possessing drugs of valuable efficacy proved themselves on the market. The company grabbed the headlines at the end of the decade when it announced the acquisition of a much larger company. In March 1999, the company revealed its plan to acquire Boulder, Colorado-based NeXstar Pharmaceuticals Inc., a company whose 1998 sales volume of $130 million was three times Gilead’s total for the year. The proposed merger, reportedly, was the result of two years of negotiations, stemming from discussions held between Gilead and NeXstar officials that had begun in April 1997. For its part, NeXstar wanted to consummate the merger because the company had decided against evolving into a full-fledged pharmaceutical company. By completing the merger, NeXstar’s biochemistry scientists would be free to focus on science, cut free from the distractions of dealing with federal regulators, the demands of Wall Street, and the concerns of delivering financial figures to appease others. Gilead, willing to accept the responsibilities of operating as a full-fledged pharmaceutical company, desired NeXstar’s two revenue-generating drugs, a fungal treatment marketed as AmBisome and an anti-cancer agent used by AIDS patients marketed as DaunoXome. Sweetening the pot for Gilead was NeXstar’s European and Australian sales force, which would prove useful as the company exerted itself as an international drug developer and marketer.
Rapid Sales Growth During the Late 1990s
As Gilead exited the 1990s and entered the 21st century, its revenues increased at a fantastic rate. Between 1998 and 2001, the company’s sales increased 501 percent, pushed upward by the growing popularity of Gilead’s portfolio of pharmaceuticals. Leading the pack was AmBisome, the injectable antifungal medication that the company gained through the NeXstar merger. AmBisome generated $142 million in sales in 2000. Two other drugs, Vistide and Tamiflu, an influenza treatment, also were gaining market share, helping to drive the company’s sales upward. Looking ahead, Gilead executives were excited by the revenue generating potential of a new drug. In May 2001, the company applied for FDA market approval of Tenofovir DF, an oral tablet that blocked reverse transcriptase, an enzyme crucial to the replication of HIV. Expectations for Tenofovir’s market success were high, both inside and outside the company. In a May 25, 2001 interview with the San Francisco Business Times, a pharmaceutical analyst remarked, “Tenofovir has the potential to generate annual sales of more than $100 million, which could make Gilead profitable in 2002.”
As its 15th anniversary approached, Gilead sharpened its focus on its expertise in infectious diseases. In November 2001, the company received FDA approval for a new HIV treatment drug it named Viread. Later in the month, the company sold its oncology business to OSI Pharmaceuticals, Inc. for approximately $170 million, shedding its involvement in developing drugs to treat cancer so more attention could be paid to infectious diseases. At roughly the same time, the company sold the use of its technology library to Cambridge, Massachusetts-based Archemix Corp., a two-year agreement that netted Gilead $17.5 million. In a November 30, 2001 interview with the San Francisco Business Times, John Martin, Gilead’s president and chief executive officer at the time, remarked, “This deal is an important step for Gilead as we continue to focus on our core competence.”
Gilead’s achievements during its first 15 years of business were sufficient to ensure its place among the industry’s leading concerns. Years of research and development work, fueled by the investment of millions of dollars, had produced several important drugs whose market appeal had delivered sizable financial rewards. The sale of the company’s oncology business left it focused exclusively on the antiviral market, providing a clear indication of which direction Gilead was pointed toward for the future. In December 2002, the company announced an acquisition that promised to bolster its position in the antiviral market considerably. Gilead announced that it had made a $464 million offer for Triangle Pharmaceuticals, Inc. The union of the two companies was viewed as complementary, with Triangle’s late-stage HIV candidate Coviracil and its collection of other HIV and chronic hepatitis B therapeutics meshing well with Gilead’s antiviral product portfolio. In anticipation of consummating the acquisition, Gilead announced that it would begin developing a co-formulation of Coviracil and Viread, its HIV drug. If successful, the result would be the first combination product dosed as one pill taken daily.
Triangle Pharmaceuticals, Inc.
Bristol-Meyers Squibb Company; Merck & Co., Inc.; Shire BioChem Inc.
- Gilead Sciences, Inc. is founded by Michael Riordan, M.D.
- The company completes its initial public offering of stock.
- The FDA approves the sale of Vistide.
- Gilead acquires NeXstar Pharmaceuticals, Inc.
- Gilead receives FDA approval for Viread, an HIV treatment drug.
- Gilead announces that it will acquire Triangle Pharmaceuticals, Inc.
Austin, Marsha, “NeXstar Deal May Mark Change in Biotech Future,” Business Journal —Serving Phoenix & The Valley of the Sun, February 18, 2000, p. 17B.
Doherty, Brendan, “New AIDS Drug May Be Solid Prescription for Gilead’s Profitability,” San Francisco Business Times, May 25, 2001, p. 53.
Dubroff, Henry, “NeXstar Points Toward Biotech’s Future,” Denver Business Journal, March 5, 1999, p. IA.
“Gilead Sciences Inc.,” Insiders’ Chronicle, May 4, 1992, p. 2.
“Gilead’s Viread Gains FDA Approval,” San Francisco Business Times, November 2, 2001, p. 54.
Ginsberg, Steve, “Improving Its Vision,” San Francisco Business Times, October 6, 1995, p. 3.
Gorman, Christine, “Flu Stopper: A New Compound Is Set for Human Testing This Year,” Time, February 10, 1997, p. 62.
Graebner, Lynn, “Gilead in a Growth Mode,” Business Journal, November 19, 1999, p. 20.
“OSI Pharmaceuticals Acquires Gilead Cancer Business,” Long Island Business News, November 30, 2001, p. 13A.
Rauber, Chris, “Gilead’s Offering Seeks $42 Million,” San Francisco Business Times, December 20, 1991, p. 1.
—Jeffrey L. Covell