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Gilead Gets Triangle, and a Product It Can Leverage

Executive Summary

Gilead's acquisition of Triangle is a clear example of a strong company buying a weak company's assets. Triangle lost the market's confidence, and its partner Abbott, through prolonged clinical difficulties that sapped its cash. Gilead bought the company primarily to get an AIDS drug, Coviricil, that will likely soon win US marketing approval. Gilead aims to co-formulate that compound with its own AIDS drug Viread, to create the first one-pill, once-daily combination therapy for AIDS. Gilead has earned a reputation for finding under-valued assets and turning them into value drivers for itself. Looks like it's at it again.

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Gilead's Bold Combo

Gilead is making a play to dominate the market for HIV treatments. It approached competing companies BMS and Merck about creating a triple-therapy well before the FDA suggested these three work together. Such an alliance directly threatens GSK. Gilead isn't just talking--it's running a head-to-head trial of a combination therapy featuring two of its drugs against another combo that includes Glaxo's. Positive data for Gilead would definitely power its bid to dominate the market.

Why Not Europe?

Gilead is now one of the few US biotech firms with European sales and marketing infrastructure, which it is leveraging well. But the company didn't take its first product to the EU on its own--and execs say playing it safe was the right choice. Other biotech firms are increasingly deciding that the cost of establishing a European marketing presence is not worth it for just one product. Cubist Pharmaceuticals is the latest in a string of companies to reach that conclusion. The reluctance stems largely from the complexities of doing business in the EU-ranging from differences in language, culture and regulatory requirements, to idiosyncratic practices in pharmaceutical marketing, sales and prescribing. Yet European rights are valuable to companies with the means to leverage them, and thus many drug developers have been able to negotiate successfully for what they want--ongoing involvement with the drug and opportunities to learn about Europe.

Novartis and Idenix Pursue Interdependent Growth

Novartis has capped a recent dealmaking spree with its most innovative deal yet--a half-acquisition of, half-alliance with, Idenix Pharmaceuticals. The big Swiss company agreed to pay $255 million to acquire a 51% equity stake in the private biotech company.

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