Provided by Seeking Alpha
Nov 7 2013, 07:00 | about: GILD, includes: ABBV, BMY, JNJ, MRK
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Sofosbuvir, Gilead Sciences' (GILD) oral hepatitis C drug was unanimously recommended for approval by an FDA advisory committee in October, thereby making it the front runner in the Hep C race. The agency's decision is scheduled for December 8.
Current treatments can take up to a year of therapy and cure only about 75 percent of patients. Gilead's daily pill can cure up to 90 percent of patients infected with certain types of the virus in just 12 weeks.
Gilead is one of a half-dozen companies racing to develop more effective treatments for hepatitis C. Johnson & Johnson's (JNJ) simeprivir was also recommended for approval and Abbvie (ABBV), Bristol-Myers (BMY) are not far behind.
Sofosbuvir
Gilead's proposed treatment is an all-oral regimen containing the hepatitis C drug sofosbuvir and ribavirin for patients with genotypes 2 and 3. Those genotypes account for the minority of patients with Hep C in the U.S.; the majority, about 75 percent of the patients, is genotype 1.
Clinicians and analysts agree that sofosbuvir is likely to be approved and will quickly become the standard of care. It is the first Hep C drug to cut treatment duration to 12 weeks from the current standard of 24 weeks using Vertex's (VRTX) Incivek or Merck's (MRK) Victrelis.
Phase 2 data from Gilead suggest a further 33 percent reduction is possible, from 12 weeks down to eight, when patients took a combination of sofosbuvir and ledipasvir, also made by Gilead.
The FDA panel also voted 15-0 to support approval of sofosbuvir for use with pegylated interferon and ribavirin in new-to-treatment patients with the more prevalent type, genotype 1, as well as in genotype 4. The panelists supported the use of the regimen in previously treated patients with genotype 1.
Sofosbuvir has been a recipient of FDA's "breakthrough therapy" designation.
Competition
On the day before the sofosbuvir meeting, an advisory panel endorsed simeprivir from Johnson & Johnson for use with pegylated interferon and ribavirin for the treatment of genotype 1 in chronic HCV patients.
Other players in the hep C race include AbbVie , Bristol-Myers Squibb, Boehringer Ingelheim, Merck, Vertex and smaller biotechs. Some of these could find a niche among the difficult-to-treat segment of patients.
Abbvie: In a prominent position behind Gilead in the competition of new HCV drugs stands AbbVie, whose multi-drug oral regimen also has a "breakthrough" status.
Abbvie is running six Phase 3 trials in 30 countries around the world with over 2200 patients testing its drugs.
It is running a dedicated study in cirrhotic patients who are the hardest to treat of all. Cirrhosis means the liver is scarred, it functions poorly as cirrhosis is considered the final stage of chronic liver disease. Abbvie's treatment represents a possible cure even for these hard-to-treat patients.
Abbott's Hep C portfolio includes drugs with three different mechanisms of action. The compounds in trials are ABT-450/r (protease inhibitor and ritonavir), ABT-267 (NS5A inhibitor) and ABT-333 (non-nucleoside polymerase inhibitor).
AbbVie's treatment will require three pills in the morning and one at night.
Some analysts consider Abbvie's treatment cumbersome compared to Gilead's because it requires four pills a day. But the company believes it is not cumbersome if it works better and cites the example of HIV sufferers who had to comply with complicated regimens for years.
Tested as a two-drug combination, ABT-450 and ABT-267 perform well. The Phase 2 data presented at the AASLD Liver meeting in November, showed it could achieve sustained virologic response in 12 more weeks after the treatment ended in 95 percent of new-to-treatment, and 90 percent in patients who had failed to respond to interferon-based treatments.
Also, the AbbVie combination has the potential to be used without interferon. Gilead's sofosbuvir could also be used without interferon in some settings, but not all.
Eliminating interferon and its flu-like side effects would be a huge step in persuading patients to seek treatment. This is one reason why newer agents like Incivek and Victrelis, which must be used with interferon, have not achieved the success they were hoped for.
Abbvie is somewhat behind in submitting data to the FDA, but it is convinced that it will eventually catch up as data from the six clinical trials will provide physicians with a broad choice of treatment options to accommodate patients at different stages of disease progression.
Abbvie's first two of its Phase 3 trials will probably read out before the end of 2013. The trial first expected to produce results is the Sapphire Itrial, in 600 Hep C genotype 1, new-to-treatment patients.
Combos: No single agent has proven so far adequate in attacking Hep C without triggering viral resistance, so it was long assumed that drug combinations relying on different mechanisms of action will be necessary to defeat the disease.
There are a great number of combos in trials.
In Phase 1, a combination of Gilead Sciences' sofosbuvir and Johnson & Johnson's simeprevir achieved a greater than 90 percent viral suppression rate in patients who have previously failed on an interferon-based therapy.
In the Phase 2 trial patients were divided into 12 weeks and 24 weeks treatment groups and then divided again into ribavirin and non-ribavirin arms.
The non-ribavirin arms achieved sustained viral response (SVR) of 93 percent, regardless of whether patients underwent 12 or 24 weeks of treatment. With 24 weeks of treatment, the arm with ribavirin had an SVR rate of 79 percent , and in the 12-week arm the SVR was 96 percent. Which raises the question if adding ribavirin to the combination makes a difference at all.
Simeprevir, now called Sovriad after it was approved in Japan, is due for FDA decision by November 28.
Bristol-Myers' drug daclatasvir is also an FDA "breakthrough" designate. In testing, daclatasvir with asunaprevir and BMS-791325, produced a high cure rate in prior treatment failures.
Vertex is also testing its experimental drug, VX-135 in combination with daclatasvir.
And Boehringer Ingelheim presented data on NS3/4a protease inhibitor faldaprevir which, in conjunction with pegylated interferon and ribavirin, had a 79 percent rate of cure in a group that had a high proportion of tough-to-treat cirrhotic patients.
Markets
The Hep C market is bigger than HIV.
The prize each competitor in the race hopes to win is huge, a share of $20 billion. There is tremendous pent-up demand for oral therapies that work faster against Hep C without using interferon.
According to Gilead's estimates there are about 4.1 million U.S. patients and another 2.8 million people living with the disease in the European Union. The company says less than half of those patients have been diagnosed and less than 10 percent have been treated.
Hepatitis C, transmitted through blood-to-blood contact, can take decades to cause the permanent scarring of the liver known as cirrhosis and has no vaccine.
People who got blood transfusions before 1992 are at risk because the blood supply wasn't screened for the virus before then. It can also be transmitted through sharing drug needles, unsterilized tattoos and, sometimes, unprotected sex. Because many people don't know they're infected, the CDC recommended last year that everyone born between 1945 and 1965 get a blood test for hepatitis C.
The consequences are expected to be staggering. Predictive models suggest a two-fold increase in HCV-related deaths with direct medical costs exceeding $6.7 billion between 2010 and 2019 and, without intervention, a four-fold rise in the incidence of end-stage liver disease related to hepatitis C within the next 20 years.
Next: Now that the days of interferon are numbered, what is next on the agenda of the developers?
Removal of the ribavirin from treatment protocols is one opportunity, the other is the reduction of the treatment duration to eight weeks, down from the current 24-48 weeks. Both of these developments, if successful, would have implications for the market.
Ribavirin has been shown to reduce the rate of relapse and it's cheap, which is positive. But it is a weak anti-viral and has to be dosed twice daily. It also causes side effects like anemia, so physicians can't give it to patients with kidney impairment or to pregnant women. Among women of child-bearing age there are a great number of HCV patients. Males are also affected in that they must practice adequate birth control with their female partners.
Gilead and others are looking for direct-acting anti-virals to replace ribavirin.
The other possibility is reducing the treatment time. Gilead's Phase 2 Lonestar trial in May demonstrated a 95-100 percent cure rate after only eight weeks of therapy with a fixed dose (made into a single pill) combination of sofosbuvir and ledipasvir.
Reducing treatment duration would improve acceptance and lessen exposure to drugs.
Another task is to provide therapy for patients with more advanced liver disease, such as cirrhosis, and those having multiple diseases like HIV, as a co-infection.
The introduction of pills will increase the overall market. Gilead estimates that 150,000 patients may seek treatment in the U.S. when these new drugs hit the market, which compares to the current 85,000 patients.
By making HCV treatment shorter, safer, easier and more effective, could mean billions in added sales. Analysts say new therapies could help grow the market to $20 billion annually by 2020.
The infectious diseases market, as a whole, rose from $33.6 billion in 2011, to $35.2 billion in 2012, according to data compiled by IMS Health on sales of Hep C and HIV drugs, antibiotics and vaccines.
Investors' summary
Gilead's sofosbuvir is projected to have annual sales of $6.03 billion by 2016, according to an average of 10 analysts' estimates compiled by Bloomberg.
Following its expected approval in December for use in genotypes 2 and 3, sofosbuvir is likely to be expanded for the more common genotype 1, when combined with ledipasvir by 2015.
In the meantime, analysts expect some off-label use of sofosbuvir plus ribavirin without interferon in new-to-treatment genotype 1 patients.
The issue of payments, like everywhere in healthcare, is crucial. Who will pay for the new regimens, which could cost $100,000 or more for a three-month course?
While today's regimens cost from $65,000-$80,000, ISI's analyst Mark Schoenebaum says he wouldn't be surprised if sofosbuvir were priced over that, possibly in the $100,000 range.
All of this new drug excitement is unfolding against the backdrop of ObamaCare which means in theory that more people will be covered, but what it means it practice, is an open question.
For both Gilead and Abbvie a success in the Hep C market is vitally important.
Gilead acquired Pharmasset in the 2011 buyout for about $11 billion and at the time some people thought it overpaid for it. Now investors are anxious to see a return on the investment.
Abbvie currently is getting most of its earnings from Humira, the world's best-selling drug which is facing a patent expiry in a few years and a success with the Hep C therapy would go a long way to strengthen its pipeline.
Gilead's sales in the third quarter totaled $2.78 billion.
Sales of the HIV drugs including Atripla, Stribild, and Truvada grew 14 percent to $2.33 billion and excluding special items the company earned 52 cents per share.
The company has increased its guidance. Gilead now expects between $10.3 and $10.4 billion in revenue this year, up from the previous guidance of $10 to $10.2 billion.
Averaged from 28 analysts by Bloomberg, earnings for 2014 are forecast at $3.03 per share.
As of September 30, 2013, Gilead had $2.76 billion of cash and cash equivalents compared to $2.58 billion at the end of 2012. During the first nine months of 2013, the company has generated $2.38 billion in operating cash flow.
Gilead's share price in the past 52 weeks ranged from $32.07 to $73.20, the stock currently is above both of the 50 and 200 days simple moving averages.
The consensus among analysts is that Gilead's sofosbuvir is destined to become almost certainly a blockbuster, with peak sales in the billions of dollars, which makes it one of the most promising drugs in development today.
No comments:
Post a Comment