Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Enanta Pharmaceuticals (ENTA -1.75%), a biopharmaceutical company that develops small-molecule drugs to treat infectious diseases, tanked as much as 22% after rival Gilead Sciences (GILD 0.07%) reported positive late-stage clinical data for three trials involving Sovaldi (previously sofosbuvir) for the treatment of genotype 1 hepatitis-C.
So what: According to the Gilead announcement, Sovaldi, when combined with ledipasvir, demonstrated a sustained virologic response (SVR) – an elimination of detectable levels of the disease -- across all three trials ranging from a low of 93.1% to a high of 99.1%. Furthermore, the Sovaldi/ledipasvir combination without a ribavirin in treatment-naïve patients delivered an SVR of 94% in just eight weeks as opposed to the 12 that Sovaldi was initially approved for.
This could be a potential problem for AbbVie (ABBV -1.03%), whose direct-acting antiviral combo drug, of which Enanta contributes ABT-450, is composed of roughly five or six pills and given over a 12-week regimen compared with Gilead's Sovaldi + ledipasvir combo, which may wind up being nothing more than a single pill. Gilead plans to file for approval for this new regimen in the first quarter of 2014.
Now what: I know it's a relatively unpopular opinion, but there could actually be room for two blockbuster treatments in the hepatitis-C space. Gilead's Sovaldi is showing remarkable results in genotype 2 and 3 patients, especially when it comes to improving patient quality of life since it can be given without interferon, but it could just as easily share the market with AbbVie's DAA-combo, which has been extremely effective in treating genotype 1 patients without the need for interferon. The launch of both of these drugs is what will really determine a "winner" (if you even want to declare one), but I see no reason as to why both can't succeed. That would mean today's drop in Enanta Pharmaceuticals which will net royalties from ABT-450 could represent an intriguing buying opportunity for investors.
