Gilead Sciences Inc. agreed Wednesday to buy a struggling North Carolina biotechnology company for $464 million in a bid to expand its share of the AIDS drug business.
Foster City, Calif.-based Gilead, which markets a successful AIDS drug, will pay $6 cash for each Triangle Pharmaceuticals share, a 33% premium over the company's closing price Tuesday of $4.50.
The deal, if approved by shareholders, strengthens Gilead's drug pipeline by giving the company three experimental HIV and hepatitis B drugs that are queued up to reach the market in the next several years. The crown jewel of the acquisition is Coviracil, an AIDS drug that could receive Food and Drug Administration marketing approval next fall. Analysts said annual sales of Coviracil could reach $200 million.
Driving the transaction is the prospect of marketing Coviracil and the Gilead drug Viread as a combination therapy, said Gilead Chief Operating Officer Mark Perry. The best-selling combination therapy, GlaxoSmithKline's twice-daily Combivir, should have sales of $850 million this year.
Perry said that a once-daily pill that combines Coviracil and Viread "could get to the levels of use in patients" as the Glaxo drug. But he cautioned that he was not making a sales estimate.
The deal would rescue Triangle from a looming financial crisis. Last month, the company reported that the $68 million it had in cash was insufficient to get it through another year, raising the likelihood that the company would be sold.
The acquisition would mark the second step in a corporate transformation that Gilead began last year when it sold its promising oncology drug pipeline to OSI Pharmaceuticals Inc. in New York for $200 million. In jettisoning its cancer portfolio, Gilead was left with a business focused on HIV and viral infections but few drug candidates in its pipeline to drive growth.
David Webber, an analyst with First Albany, said the Triangle deal would resolve "one long-term weakness -- the lack of a sufficient drug pipeline" to drive Gilead's growth. He expects Gilead to launch Coviracil for hepatitis B in 2004 and the combined AIDS therapy in 2005.
Leading Gilead's transformation is Viread, the key to Gilead's first profitable year. The AIDS drug, launched late in 2001, should have sales of $220 million this year, Webber said, and $370 million next year.
David Williams, an analyst with Fulcrum Global Partners in New York, said that although the deal represents a long-term opportunity for Gilead, it would put the company in a "precarious cash position." He said the company would use most of its available cash to buy Triangle, leaving it with $160 million.
Gilead shares closed Wednesday at $37.61, up 73 cents, and Triangle closed at $5.82, up $1.32; both trade on Nasdaq.