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Bristol-Myers Squibb Co.'s Daclatasvir May Prove a Winner

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A seemingly late start had most thinking Bristol-Myers Squibb's (NYSE: BMY  ) hepatitis C drug daclatasvir would prove an also-ran in the race for market share.

But a savvy move to focus overseas and seemingly eye-popping results for the drug when combined with Gilead's  (NASDAQ: GILD  ) Sovaldi are starting to make it look as if daclatasvir has a better chance to capture sales than competitors Johnson & Johnson (NYSE: JNJ  ) and AbbVie (NYSE: ABBV  ) .

New therapies entering the growing market
Two of the highest-profile companies in the hunt for these therapies have been Gilead, which acquired Sovaldi in an $11 billion deal back in 2010, and Johnson, which has been nipping at Sovaldi's heels with its Olysio.

Both drugs won FDA approval heading into year's end, suggesting a very interesting first quarter for industry watchers. However, Gilead is likely to have the advantage, given, as I previously highlighted, that Sovaldi was more effective in a big subset of the hepatitis C population. That suggests Olysio may struggle to carve out a niche of its own.

But despite the early lead in approval for Gilead and Johnson, Bristol appears unfazed. In a prescient decision to focus on Japan at a time when the country is becoming friendlier to drugmakers, Bristol appears to have an edge in treating Japan's 1 million hepatitis C patients.

Impressive phase 2 study results showing that a combination of daclatasvir with Gilead's Sovaldi cleared the disease in 100% of patients makes Bristol's potential even more intriguing, especially since all those patients had previously failed on prior-generation therapies Invicek and Victrelis.

While Gilead chose to opt out of moving the drug combo into phase 3 trials, doctors, patients, and regulators have been less willing to give up on it. As a result, European regulators approved a compassionate-use program for the combination last fall for use in the most critical cases.

That use could expand if the EU approves commercialization of daclatasvir this year. If it does, then it's certainly possible the FDA will follow suit.

An approval and groundswell in demand would then put the pressure on payers, who might otherwise balk at paying for both drugs, which could run well north of $100,000 given Sovaldi's $84,000 cost per course of treatment.

More developments are coming
Gilead's reluctance to move ahead with Bristol probably stems from the success it's having with its own oral program. The company has reported strong data supporting its Sovaldi-plus-ledipasvir combination, showing that it cleared the disease in 95% of genotype 1 patients. Gilead plans to file with the FDA for approval of that therapy in the first quarter.

AbbVie is also vying for FDA approval with its own three-drug oral cocktail. The combination of AbbVie compounds cleared the disease in 96% historically tough-to-treat genotype 1a patients over 12 weeks of treatment in phase 3 trials.  

Fool-worthy final thoughts
The global need for hepatitis C therapies is big and growing. More than 170 million are infected worldwide, according to the World Health Organization. And 20,000 to 30,000 more are likely to be diagnosed with the disease each year in the United States. That has drug wholesaler Express Scripts calling for a quadrupling of spending in the U.S. on hepatitis C over the next three years, making the disease the fastest-growing indication for specialty drugs.

As a result, Bristol is looking at other ways to maximize daclatasvir's appeal, including pairing the drug up with Vertex Pharmaceuticals' (NASDAQ: VRTX  )  VX-135. Vertex, the company behind former blockbuster hepatitis C treatment Incivek, recently reported that combining VX-135 with daclatasvir cleared the disease in 83% of patients over just four weeks. If those results continue in phase 3, daclatasvir may have an opportunity to win additional market share as doctors look for shorter treatment periods.

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Todd Campbell

Todd has been helping buy side portfolio managers as an independent researcher for over a decade. In 2003, Todd founded E.B. Capital Markets, LLC, a research firm providing action oriented ideas to professional investors. Todd has provided insight to a variety of publications, including SmartMoney, Barron's, and CNN/fn.

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