Oral Hepatitis C Cure on Its Way

Gilead Sciences (NASDAQ: GILD  ) moved one step closer to an all-oral cure for hepatitis C on Monday when the company submitted its application to the Food and Drug Administration to market sofosbuvir for the viral infection.

The current regimen for patients with hepatitis C involves taking one of two oral drugs -- either Merck's (NYSE: MRK  ) Victrelis or Vertex Pharmaceuticals' (NASDAQ: VRTX  ) Incivek -- plus an oral generic called ribavirin and a branded a pegylated interferon drug, either Merck's PegIntron or Roche's Pegasys. Pegylated interferons have to be injected, which patients generally don't like, and more importantly, they also cause uncomfortable side effects, including flu-like symptoms. Considering they have to be taken for six months or more, it's understandable why patients don't like them.

Short-term subdued
Sofosbuvir passed four phase 3 trials. It seems very likely that the FDA will approve the drug in eight to 12 months depending on whether the drug is given a priority review.

But for most hepatitis C patients, sofosbuvir isn't a cure-all by itself. When the drug is combined with ribavirin, it does a pretty good job at curing patients with genotype 2 and 3, but the most common genotype in the U.S. is genotype 1. Patients with genotype 1, along with genotype 4, 5, and 6, will still have to take PegIntron or Pegasys and ribavirin if sofosbuvir is approved.

While some patients will do just that, many will wait. Hepatitis C is a slow -cting disease. Eventually the virus starts to damage the liver, including potentially causing liver cancer, but it takes a long time to get that far. Most patients can wait for a better treatment.

They're already doing that. Sales of Incivek and Victrelis peaked shortly not long after their launches as patients wait for better treatments. Sales of sofosbuvir will likely follow the same path. At least initially.

Long-term lucrative
Gilead is testing sofosbuvir in combination with another oral medication, GS-5885, with and without ribavirin in genotype 1 patients. If the phase 3 trials turn out positive, the additional data could be added to the label after it's approved. Doctors can prescribe it off-label before that, but they'd have to wait for GS-5885 -- or a fixed-dose combination pill that contained both medications -- to be approved.

How big of a blockbuster sofosbuvir becomes depends on how good the data is compared to other all-oral cocktails being developed by AbbVie (NYSE: ABBV  ) , Vertex, Johnson & Johnson (NYSE: JNJ  ) , and many others. The cure rates will be important, but as they exceed 90%, safety and the amount of time patients have to take the drug will become more important.

Gilead, for instance, is testing sofosbuvir and GS-5885 with and without ribavirin for eight weeks. Even if it doesn't beat AbbVie's all-oral cocktail, which produced a 99% cure rate in one of its phase 2 trials, a shorter time frame might help attract patients.

The other main driver for sales will be how many patients infected with hepatitis C are actually treated. The Centers for Disease Control and Prevention estimates that there are 3.2 million people in the U.S. infected with hepatitis C, but many don't know it because they've never been tested and they won't exhibit symptoms for many years. If drugmakers can convince doctors to routinely test for the infection, the potential market increases substantially.

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