Gilead Sciences has agreed to buy Palo Alto-based CV Therapeutics for $1.4 billion dollars.

According to SF Gate, Gilead Sciences will pay $20 per share for CV Therapeutics, which reported $154.5 million in revenue in 2008.  Most of that revenue comes from Ranexa, a drug from chronic angina.

Is this a good deal for Gilead Sciences?

Well, SF Gate reported that a Citi investment research analyst backed the deal as making "strategic sense" but described the price as "very steep."

The Mercury News explained the purchase as part of an overall Gilead strategy to acquire other companies and product lines in order to bolster their pipeline, which has been historically focused on HIV drugs.  The Mercury News reported:

[T]he company primarily owes its commercial success to its HIV drugs — Viread, Emtriva, Truvada and Atripla — which won FDA approval respectively in 2001, 2003, 2004 and 2006.Those drugs dominate the HIV-drug market and provide the vast majority of Gilead’s revenue, which totaled $5.34 billion in 2008, a 26 percent increase from 2007. On the basis of those sales, Gilead is the world’s third-biggest biotech company, behind Amgen of Thousand Oaks and Genentech of South San Francisco, according to data compiled by investment bank Jefferies & Co.To stay profitable, Gilead has been eager to branch out.

Some commentators, however, have suggested that the real value to this deal for Gilead Sciences is not so much the CV Therapeutics pipeline as it is the CV Therapeutics sales force. 

The In Vivo Blog reported as follows:

[Gilead] has also built a budding cardiovascular franchise centered around its pulmonary arterial hypertension drug Letairis and a Phase III drug for resistant hypertension called daruesentan. There’s a strategic fit argument, therefore, when it comes to Gilead’s buying CVT: the Palo Alto-based biotech provides the company with some additional diversification in a bulked up cardiology franchise–CVT already markets Ranexa and Lexiscan–as well as a ready-made sales force to market the products.

According to In Vivo Blog, there is the potential, however, for one additional Gilead benefit to doing this deal: full ownership rights in Lexiscan may eventually revert to CV Therapeutics, pending the outcome of litigation with Astellas.  if Gilead were to obtain full rights in Lexiscan, In Vivo Blog anticipates that this would be a real boost to Gilead’s bottom line. 

All in all, the consensus seems to be that Gilead took a bit of a financial risk in going forward with this deal, but that the risk is a reasonable one, which is in line with Gilead’s overall business strategy.  In the end, however, only time will tell if the move truly pays off for Gilead.

Palo Alto-based CV Therapeutics signed a lucrative deal earlier this week with New York-based TPG-Axon Capital in which TPG-Axon Capital, a New York hedge fund, agreed to pay up to $185 million in exchange for the payment of a royalty in the amount of fifty percent of its North American sales of Lexiscan, reported the San Jose Business Journal. 

According to the San Jose Business Journal, the U.S. Food and Drug Administration("FDA") recently approved CV Therapeutics’s Lexiscan injection, an A2A adenosine receptor agonist, for use as a pharmacologic stress agent for patients unable to undergo adequate exercise for stress tests.

The San Jose Business Journal reported on the terms of the deal as follows:

[T]he deal with. . . .TPG-Axon Capital includes $175 million on closing of the transaction and a potential future milestone payment of $10 million. . . .CV Therapeutics retains rights to the other 50 percent of royalty revenue from North American sales of the product [by its partner Astellas Pharma US, Inc., and also may receive a royalty on another Astellas product under the terms of the company’s collaboration agreement with Astellas Pharma US Inc.

The San Jose Mercury News further reported:

[I]nvestment bank Leerink Swann described the $175 million payment as "a surprisingly positive transaction," because other heart stressing agents already are on the market.

"The magnitude of this deal is much bigger than we would expect since physicians we have queried seem relatively uninterested in a novel cardiac stress agent," the report said.

It goes with out staying that a deal of this magnitude dramatically improves CV Therapeutics’ cash flow situation.  According the the San Jose Business Journal, CV Therapeutics plans to use the financing to meet a 2010 debt obligation and to also support its commercialization plans for Ranexa.