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Lead product from $5B Gilead-Galapagos partnership fails in autoimmune disorders

Gilead Sciences Inc. executives revealed that a lineup of as many as three drugs failed proof-of concept trials in the autoimmune disorders lupus and Sjogren's disease, presenting a hurdle in the company's efforts to reach those markets.

Gilead's promising immunological candidate filgotinib — co-developed by Galapagos NV — was among those drugs tested for cutaneous lupus, which causes rashes and lesions on the skin, and Sjogren's disease, which affects the salivary and tear glands. Filgotinib was the only one that showed "evidence of activity," but still did not meet the primary goals of the study.

The Foster City, Calif.-based company closed a $5 billion development deal with Galapagos in August to expand its pipeline beyond mainstays in HIV, hepatitis and cell therapy. Gilead CEO Daniel O'Day called the partnership and M&A strategy a priority on the company's Oct. 24 post-market third-quarter earnings call, even though the deal led to a profit loss for the quarter.

News that the primary drug candidate from the partnership could have fewer indications gave investors pause with respect to Gilead's bet.

Shares of Gilead fell almost 4.44% to $63.07 as of 1:11 p.m. ET on Oct. 25. Galapagos shares were up 1.45% to $166.65.

"We're looking at the full set of data from all of these studies, and we'll determine the next steps that we take in lupus and Sjogren's disease," said John Sundy, senior vice president of clinical research in inflammation and respiratory therapeutics at Gilead.

SVB Leerink analyst Pasha Sarraf said in an Oct. 25 note that the failure was expected based on the drug's method of action and that a win in this area did not play into their models for Gilead and Galapagos.
"We understand, however, why Galapagos and Gilead may have wanted to jump ahead of a competitive area by being aggressive in these two indications," Sarraf said.

Galapagos and Gilead plan to file for U.S. approval of filgotinib, which belongs to a class of immunological drugs called JAK inhibitors, for rheumatoid arthritis by the end of the year. The companies also expect data for ulcerative colitis in 2020.

Jefferies analyst Peter Welford said in an Oct. 25 note that despite the loss of the lupus and Sjogren's indications, he expects filgotinib to reach $6 billion in worldwide peak sales, half of which would come from rheumatoid arthritis. Ulcerative colitis could account for $400 million in sales and any other indications could reach $2 billion, he said.

Gilead has a second drug in development for these two diseases, a Syk inhibitor dubbed GS-9876.

Shift in HIV research priority

On the same earnings call, Gilead announced that it had quietly pulled one of its HIV drugs in development, GS-9131, a nucleotide reverse transcriptase inhibitor.

Gilead instead plans to place priority on another of its HIV programs, GS-6207, which is a capsid inhibitor that Senior Vice President of HIV Diana Brainard said is a first-in-class compound with an unmatched mechanism of action and resistance to the virus.

"Because of this novel mechanism, because of the potency, because of the lack of pre-existing resistance, we really feel that the capsid inhibitor is really the best lead compound to bring forward in highly treatment-experienced patients," Brainard said. "And therefore, we won't be bringing GS-9131 forward for this population."