Gilead, J&J to develop once-daily HIV pill

LOS ANGELES (Reuters) - Drug makers Gilead Sciences Inc and Johnson & Johnson on Thursday said they plan to develop the second once-daily pill for treating HIV, the virus that causes AIDs.

The deal was widely expected, but is nevertheless a coup for Gilead, said Cowen and Co analyst Phil Nadeau.

"The J&J drug is one of the most interesting HIV drugs in development ... Gilead is getting it at a discount to the retail price," he said.

The new antiretroviral drug would contain J&J's experimental non-nucleoside reverse transcriptase inhibitor known as TMC278, and Truvada, a pill that combines Gilead's Viread and Emtriva.

Truvada is also sold as part of a combination pill called Atripla that contains Bristol-Myers Squibb Co's Sustiva. Atripla, which had 2008 sales of $1.57 billion, was the first once-daily pill for HIV.

In the deal with Bristol-Myers, Gilead pays the full retail price for Sustiva, with no discount.

In the new agreement with J&J, Gilead said it will pay development costs of up to $100 million and will receive TMC278 from J&J at a discount of up to 30 percent from its market price.

Kevin Young, head of commercial operations at Gilead, said the J&J HIV drug is expected to reach the market as a single agent sometime in 2011. Gilead will conduct parallel development of the combination product, but a specific timeline will depend on the U.S. Food and Drug Administration, he said.

The deal with J&J also helps Gilead extend its franchise since Sustiva's patents will expire sometime in the next decade, Nadeau said. Patents on Gilead's drugs will expire between 2017 and 2021, he added.

The analyst said sales of the new drug would likely eat into sales of Atripla, especially because of central nervous system side effects associated with Sustiva.

Young said the new combination pill, along with Gilead's experimental "quad" pill, will be used for newly-diagnosed patients, with physicians reluctant to change therapy for patients who are responding well to Atripla.

Gilead said it will assume the lead role in manufacturing and commercialization of the fixed-dose combination of TMC278 and Truvada throughout most of the world.

J&J, which already is studying the use of Truvada and TMC278 together in its Phase III program, said it will remain responsible for commercialization of TMC278 as a single product and will have the right to promote the combination product in Japan and low-income countries.

Gilead said development of the combination pill is dependent on its regulatory approval within three years of single-product TMC278 being approved in the United States or Europe.

Shares of Gilead, which rose 2.3 percent to close at $46.87 on Nasdaq, were up 2.4 percent at $48.00 after-hours. Shares of J&J, which gained 30 cents to close at $59.25 on the New York Stock Exchange, were unchanged.

(Reporting by Deena Beasley; editing by Carol Bishopric, Gary Hill and Bernard Orr)