Gilead Sciences (GILD - Get Report) is paying $400 million upfront to acquire an early-stage pipeline of liver disease drugs from privately held Nimbus Therapeutics, the companies announced Monday.

Central to the Gilead purchase is a Nimbus compound with a novel mechanism of action targeting nonalcoholic steatohepatitis (NASH), better known as fatty liver disease. The lead Nimbus drug is just entering a phase II study and will be the fourth NASH compound in Gilead's pipeline once the deal closes.

Investors have been anxious for Gilead to pull the trigger on an acquisition that can deliver robust earnings growth once the company's now-dominant hepatitis C business starts to diminish.

Monday's Nimbus purchase may not fit the "transformative" definition just yet but it does underscore Gilead's commitment to expanding its business into other serious liver diseases.

NASH is a chronic, progressive disease in which the liver becomes saturated with fat. Left untreated, NASH causes liver inflammation, cirrhosis and liver failure. Diagnosis of NASH is becoming more common as obesity rates increase but no approved therapies exist to treat the disease. That's the recipe for a potential blockbuster market opportunity, which is why companies like Intercept Pharmaceuticals (ICPT - Get Report) , Genfit, Gilead Sciences and others are advancing drugs through clinical trials.

Nimbus' lead compound, NDI-010976 is designed to block an enzyme, acetyl-CoA carboxylase (ACC), involved in the production of fatty substances in the liver. Blocking ACC might also help stimulate the breakdown of existing fats in the liver. Data from a phase I study of NDI-010976 will be presented next months at the annual meeting of the European Association for the Study of the Liver (EASL).

"The acquisition of Nimbus' ACC-inhibitor program represents a timely and important opportunity to accelerate Gilead's ongoing efforts to address unmet needs in NASH," said Norbert Bischofberger, Gilead's chief scientific officer, in a statement. "These molecules will complement and further strengthen Gilead's pipeline and capabilities to advance a broad clinical program in NASH that includes compounds targeting multiple key pathways involved in the pathogenesis of the disease."

The two existing NASH drugs in Gilead's pipeline are simtuzumab, GS-4997 and GS-9674. The latter drug was acquired last year, also via the purchase of a privately held company.

Gilead is paying $400 million in cash for the liver disease programs from Nimbus. Nimbus is also eligible to receive an additional $800 million in milestone-related payments.

Nimbus is a portfolio company of the Cambridge, Mass.-based venture capital firm Atlas Ventures. Last week, another Atlas-backed company, Padlock Therapeutics, was sold to Bristol-Myers Squibb.


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