The Most Important Week of the Year Has Arrived for Gilead Sciences

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By Sean Williams | More Articles
October 22, 2013 |

It's not time yet for biopharmaceutical juggernaut Gilead Sciences (NASDAQ: GILD ) to report earnings -- that will come next week. But this is, nonetheless, the most important week of the year for the company.

On Wednesday, the Food and Drug Administration is set to release its briefing documents on Gilead's oral hepatitis C drug sofosbuvir, ahead of a Food and Drug Administration advisory panel meeting Friday. This, without question, is a meeting that could make or break Gilead for the remainder of the year.

Why the buzz?
Right now you're probably wondering what the big deal is given that biopharmaceutical companies have FDA panel meetings all the time. The reason sofosbuvir is so important is that it treats the chronic form of Hepatitis C, which afflicts some 3.2 million people in the United States (many unknowingly) and may lead to cirrhosis of the liver or even liver cancer over the long run. The overall market potential in hepatitis C treatments could be as high as $20 billion, which is more than enough to make most pharmaceutical companies get wide-eyed.

Source: U.S. Navy, Wikimedia Commons.

What has hep-C patients so excited -- and what makes sofosbuvir so revolutionary -- is that an FDA approval of the oral drug would mean that some patients would no longer be required to take the drug with IV interferon. The problem with interferon-based therapies is that they can give patients flu-like symptoms for the duration of a treatment course that can last up to 48 weeks.

What sofosbuvir could potentially replace
We've come an incredibly long way in a short amount of time in treating hepatitis C. In 2011, we saw two new oral drugs approved that were to be used in combination with intravenous interferon: Vertex Pharmaceuticals' (NASDAQ: VRTX ) Incivek and Merck's (NYSE: MRK ) Victrelis.

Prior to Incivek and Victrelis, the standard of treatment for hep-C patients was a combination of peginterferon and ribavirin, which demonstrated a response (not effectiveness... just a response) in fewer than 50% of patients. When Incivek rolled around with a late-stage sustained virologic response, or SVR, after 24 weeks of 79%, investors and patients' eyes were opened in a big way. Over the months following its launch, Incivek would become the quickest drug ever to reach $1 billion in sales. The good times, though, wouldn't last long thanks to the development of Gilead's sofosbuvir and AbbVie's (NYSE: ABBV ) direct-acting antiviral combo drug.

Is sofosbuvir really that good?
You're probably wondering what makes sofosbuvir so special. The investing community got its first taste of the treatment's potential in a midstage trial in which it delivered an SVR (i.e., no detectable levels of the hepatitis C virus) after just 12 weeks in 100% of all 25 patients. Keep in mind here that Incivek's 79% SVR was after 24 weeks. While Gilead's sofosbuvir wouldn't continue its perfect ways in late-stage studies, it would certainly give shareholders all the more reason to believe in its blockbuster potential.

Gilead ran four late-stage safety and efficacy trials using sofosbuvir on six different hep-C genotypes. The most encompassing was its Neutrino trial, which consisted of patients with genotypes 1, 4, 5, and 6. Genotype 1 is by far the most common and the one that biopharmaceutical companies are most geared toward treating. The results of Gilead's 327-patient trial showed that peginterferon plus ribavirin with oral sofosbuvir delivered 12-week SVR of 90% in treatment-naive patients. The results were just as encouraging for genotype 2 and 3 patients: its Positron trial delivered an SVR of 78% after just 12 weeks in patients who were intolerant of interferon.

So yeah -- it's really that good!

Is it a slam dunk for approval?
I believe my Foolish colleague Brian Orelli said it best yesterday, "The FDA's job is to find every potential issue, no matter how small." I wholeheartedly agree with Brian that there doesn't appear to be anything inherent in the data that would suggest sofosbuvir isn't ripe for approval on an efficacy basis. On paper, it looks superior to both Incivek and Victrelis across all of the major hepatitis C genotypes.

Where the product could get tripped up is in either the manufacturing aspects or perhaps the long-term safety aspects of taking sofosbuvir. Don't misconstrue what I'm saying here -- there hasn't been anything to this point to suggest there is a safety problem with sofosbuvir. I'm merely reiterating what Brian noted -- that there's a strong possibility that the FDA will find something to point out. Therefore, I'd call it as close to a slam dunk on efficacy as you can get prior to an FDA panel meeting, but there are always going to be question marks surrounding long-term usage safety and manufacturing procedures heading into advisory meetings like this.

If approved, will sofosbuvir have a cakewalk to blockbuster success?
Now here's the tricky part: A positive opinion by the FDA's panel, and even an eventual FDA approval, won't completely put Gilead at the head of the pack. But it'll certainly place it near the top.

FDA approval of sofosbuvir would likely push Incivek and Victrelis out of the picture. But Gilead will still need to contend with AbbVie's very successful direct-acting antiviral combo, which has earned the highly coveted breakthrough therapy designation and delivered an equally impressive SVR of 97% on 79 patients after 12 weeks in a midstage study. AbbVie is conducting late-stage studies on its DAA combo drug and should deliver top-line data soon.

There are other competing pipeline products waiting in the wings, but few are going to be able to keep up with sofosbuvir. At one time, Achillion Pharmaceuticals' (NASDAQ: ACHN ) pipeline looked incredibly promising and was being led by the non-nucleotide-based inhibitor sovaprevir. With Bristol-Myers Squibb's BMS-986094 shelved after causing the death of a patient in a midstage study, taking Idenix Pharmaceuticals' then-leading hep-C drug candidate with it, Achillion's sovaprevir was expected to be another contender. However, in a recent early stage drug-to-drug interaction study with atazanavir researchers discovered elevated ALT liver enzymes. This led to an ongoing FDA clinical hold on sovaprevir from further studies.

In other words, outside of AbbVie, Gilead has pulled away from many of its peers over the past year.

What should you do
With the briefing document release less than a day away, the thing to remember is not to overreact to the FDA panel's findings. That doesn't mean your fellow shareholders aren't going to overreact, but your long-term thesis on Gilead is likely to be unaltered if the panel points out a few cautionary notes or if it gives sofosbuvir a practical clean bill of health. We will certainly have a lot more to go on by the end of the week (remember that the actual panel meeting is Friday), and will be able to get a more thorough review of the FDA's findings by then.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool recommends Gilead Sciences and Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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