Biotech investors are notorious for overreacting to positive data from small clinical trials. "If it works in a few patients, it should work in a larger trial" is a reasonable hypothesis, but it's not a fact.
Apparently overreacting to negative news from a small trial is possible too, especially for a company like Gilead Sciences (Nasdaq: GILD ) , which has been up more than 30% over the last six weeks. The biotech said that six of eight patients taking its hepatitis C drug GS-7977 combined with ribavirin have experienced viral relapse, meaning the virus came back after the treatment regimen was finished. Shares are down almost 15% today, but investors shouldn't be so quick to jump to the conclusion that if it doesn't work on those eight patients, it won't work on a larger population; these were not your average patients.
All eight were null responders to Roche's Pegasys or Merck's (NYSE: MRK ) PegIntron, meaning that their virus levels didn't go down with prior treatment. This patient population is notoriously hard to treat; when Vertex Pharmaceuticals' (Nasdaq: VRTX ) Incivek is combined with peginterferon and ribavirin in null responders, only 32% of patients respond to the drug. A mere 5% of patients are rid of their virus if they're just retreated with peginterferon and ribavirin.
And the treatment with GS-7977 wasn't exactly optimized; the drug was dosed by itself for just 12 weeks. Incivek is dosed for only 12 weeks, but null responders remain on peginterferon and ribavirin for that time as well as an additional 36 weeks.
The only thing we can fault Gilead -- or Pharmasset, really, since they designed the trial before Gilead purchased the company – for is being so cocky as to think that the drug would work as a single agent, on a hard-to-treat population, for a short period of time. But of course, that's why the company tried it on a small number of patients in the first place.
The solution is to combine the drug with others into a cocktail and perhaps dose it for longer. GS-7977 is already being tested in combination with Johnson & Johnson's (NYSE: JNJ ) TMC435 and Bristol-Myers Squibb's (NYSE: BMY ) daclatasvir. It seems that'll be necessary for null treatments and might even be required for treatment-naïve patients, but a change in dosing doesn't necessarily take away from the sales potential of GS-7977.
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