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Bristol-Myers Squibb Finds a Novel Way of Treating Hepatitis C

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For those suffering from hepatitis C, or HCV, a new therapy that combines three different drugs treated about 90% of patients, according to preliminary results from a randomized, phase 2 clinical trial supported by Bristol-Myers Squibb (NYSE: BMY  ) . That's exciting news because this therapy doesn't rely on the standard course of treatment that has been used for years -- a combination of pegylated interferon alfa and ribavirin. These two medications can produce various side effects that make treatment difficult and possibly dangerous. Positive outcomes using only interferon and ribavirin occur in only about 50% of patients with genotype 1, a difficult-to-treat form of HCV.

The new triple drug cocktail uses once-daily daclatasvir, twice-daily asunaprevir, and a twice-daily still unnamed drug referred to as BMS-791325. The drugs used in this new therapy are direct-acting agents that target the virus, unlike the standard therapy, and lead to more positive outcomes. The researchers found no adverse events that caused patients to stop treatment, and the study is being expanded to include other patient populations.

Treating viruses a profitable business for Bristol
The therapeutic area of virology, which currently includes drugs that treat hepatitis B and HIV, is a major revenue generator for Bristol-Myers. It accounted for 25% of total net worldwide sales for 2012. Net sales for the second quarter dropped 9% to $4.04 billion from $4.44 billion in the same period in 2012. GAAP diluted EPS also dropped 16% to $0.32 per share, and non-GAAP diluted EPS dropped 8% to $0.44 per share. The drop in sales is attributed to the U.S. patent expiration of cardiovascular drugs Avapro/Avalide and Plavix.

At a medical conference on liver diseases, Bristol will be presenting the first phase III study evaluating an interferon-free and ribavirin-free course of treatment for HCV. The study details the results of an oral combination of daclatasvir and asunaprevir given to Japanese patients with genotype 1b. The data, along with the presentation of 16 other abstracts, will be key in showing the company's broad pipeline of treatments for hepatitis C.

How is the competition faring?
According to Research and Markets, an international market research firm, the hepatitis C market is expected to grow by 2018 to more than three times its market size in 2012. Analysts predict that the HCV market could generate as much as $16.5 billion annually, so Bristol won't be alone in the development of new treatments for the disease.

Gilead Sciences (NASDAQ: GILD  ) currently has two drugs that are commercially available to treat hepatitis B (Viread and Hipsera) and five therapies in its pipeline that could become future treatments for HCV. In January 2012, the company acquired Pharmasset in an effort to speed up the development of the first all-oral HCV therapy expected to provide a new treatment option to a greater number of patients. The therapy is also expected to deliver revenue growth and diversification to the company's drug portfolio for 2014 and beyond. Gilead's total revenue grew a healthy 15% to $2.77 billion in the second quarter ended June 30, from $2.41 billion in the same period of 2012. Sales during the quarter were driven mostly by growth from its antiviral products used to treat HIV .

Another of Bristol's rivals, Abbott Laboratories (NYSE: ABT  ) has spent more than 40 years developing and improving tests that detect and monitor the various forms of hepatitis. The company's diagnostics business earned $4.3 billion in 2012, or about 20% of 2012's total net sales of $22 billion. In June of this year, Abbott announced a new fully automated test that can be used to determine the specific genotype of the HCV virus found in a patient's blood. The test, which received FDA approval, will help doctors personalize treatment by patient based on the genotype of the HCV virus, which can lead to improved outcomes. Abbott also found success with a trial that used a two- or three-drug combo, along with ribavirin, to treat HCV. Though the treatment cleared HCV in about 99% of the patients in the study, it uses the drug ritonavir, which many physicians don't want to use according to comments made by industry analyst Mark Schoenebaum to Bloomberg. Shares for Abbott closed up 4% after the results of the trial were announced.

My Foolish conclusion
It appears that the medical community is focused on moving beyond the standard therapy used to treat hepatitis C, which is intolerable for some patients and leaves many without treatment options. This creates an opportunity for pharmaceutical companies searching for new treatments that are safer and produce better patient outcomes. The latest research from Bristol-Myers and Gilead Sciences for an all-oral HCV treatment that uses newer drugs, which directly target the virus, can benefit a greater number of patients. The potential revenue streams that could result from these new therapies should pique the interest of any health care investor.

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