Does the Latest HCV Breakthrough Therapy Spell Trouble for Gilead Sciences, Inc.?

See what three competing HCV combos with breakthrough designations will do to Gilead's blockbuster.

Feb 26, 2014 at 5:30PM

Gilead Sciences (NASDAQ:GILD) was the first to submit its highly anticipated hepatitis C virus (HCV) combination therapy to the FDA. Recently, Bristol-Myers Squibb (NYSE:BMY) earned a Breakthrough Therapy designation for its dual regimen, likely to compete with Gilead's. AbbVie (NYSE:ABBV), and Merck (NYSE:MRK) are also developing combination HCV treatments of their own, both with breakthrough designations.

Gilead's combo carries an enormous price tag, but America's largest pharmacy benefit manager Express Scripts (NASDAQ:ESRX) has voiced its intent to curtail the pharmaceutical industry's pricing power. Here's a look at the competing therapies, and the expedited regulatory pathway that could result in several of them reaching the market at roughly the same time.

About the Breakthrough Therapy designation
The FDA has implemented expedited pathways in the past, but I don't think any has been as well defined as the Breakthrough Therapy designation. Implemented in 2012, the designation is reserved for targeted therapies that hit significant efficacy marks in early or mid-stage clinical trials. The nature of the condition must also be serious enough that patients are clearly willing to trade safety for speed, like HCV.

Without an expedited pathway, HCV therapies would likely need to provide data on the percent of patients surviving for several years after dosing. With the designation the FDA will work with the drug makers to define acceptable, shorter-term endpoints that should warrant approval. Of course, early approvals remain contingent on longer safety trials also designed in partnership with the agency. In the meantime, patients with unmet needs gain access to lifesaving new treatments.

Clash of the combos
From Gilead's perspective, the designation can erode the lead its HCV therapy had on its competitors. Gilead's Sovaldi as a single agent may have beat competitors to the US market in December last year, and last month in the EU, but it's the combination therapies that seem to have doctors warehousing patients by the thousands.

Fellow Foolish author Brian Orelli raised an important point recently. As a single agent, Sovaldi pills must be taken with pegylated interferon injections to be effective for genotype 1 (GT1) patients. Interferon injections produce very uncomfortable side effects. Sovaldi's first year on the market flying solo may be one of the most successful launches ever, but there are potentially millions of HCV patients that can wait for interferon and ribavirin free combination therapies. And that's where the trouble lies for Gilead in the years ahead.

In order to see a return on the $11 billion spent acquiring Sovaldi, Gilead has priced the single-agent therapy at $84,000 for a 12 week regimen in the US. If Express Scripts, America's largest pharmacy benefit manager, has its way, the combo will be far less expensive. During an interview with Bloomberg late last year, Express Scripts' Chief Medical Officer Steven Miller said his company would, "identify which drugs can be pitted against each other and make some really tough formulary decisions." Others may compete with Gilead on price, and the HCV combo field is getting more crowded each month.

A Breakthrough Therapy breakdown
AbbVie, Merck, and Bristol-Myers all have Breakthrough Therapy designated, HCV combinations in development. In a recent post I highlighted some data that makes AbbVie's and Merck's cocktails seem just as effective as Gilead's combination pill.

Since then Gilead has filed a New Drug Application with the FDA for the once-daily fixed-dose combination of ledipasvir and sofosbuvir for the treatment of GT1 HCV. On February 24, the FDA granted a Breakthrough Therapy designation to Bristol-Myers' daclatasvir and asunaprevir combination therapy for genotype 1b HCV patients. This is the second Breakthrough designation granted to Bristol-Myers' HCV combos.

While AbbVie and Gilead are widely expected to compete in order to remain on the Express Scripts formulary, Bristol-Myers' two drug combo was designated for the GT1b indication. Generally GT1b is more prevalent in Europe, so Gilead and AbbVie might not be competing with Bristol-Myers for a place on the Express Scripts formulary. At least not for a majority of GT1 patients.

Merck's two-pill HCV combination received its breakthrough designation last October for GT1 HCV. The company has remained quiet about the combo since reporting interim data at the American Association for the Study of Liver Diseases Meeting last November. During the latest earnings call, Merck's management mentioned its HCV program only in passing. The company's R&D head, Roger Perlmutter responsed to a direct question regarding the regimen by stating that data so far was not yet ideal. I'll keep my eyes open for more from the company. For now it doesn't seem that Merck is willing to enter the ring with AbbVie, Gilead, and Bristol-Myers just yet.

Final take
There may be three other HCV combination therapies in development with breakthrough designations, but for now it seems Gilead needs to concern itself with just one, AbbVie's. We can nitpick over the data, but the opinion that matters is that of major payers, like Express Scripts.

The late stage data from AbbVie and Gilead are outstanding, and Merck doesn't seem like it's willing to compete with them. If Bristol-Myers' combo's designation will only support an early approval for GT1b patients specifically, that should leave the majority of the US market to Gilead, and AbbVie. So far, it seems the only clear winner from that fight will be the payers.

Getting in early on a new idea can be critical
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980's, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in late 1990's, when they were nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play", and then watch as it grows in EXPLOSIVE lock-step with it's industry. Our expert team of equity analysts has identified 1 stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Cory Renauer has no position in any stocks mentioned. The Motley Fool recommends Express Scripts and Gilead Sciences. The Motley Fool owns shares of Express Scripts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information