With the release of phase 2 data from Merck (MRK -0.22%) and phase 3 data from Bristol-Myers Squibb (BMY 0.39%) , the race for the new hepatitis C combination treatment is heating up.

While leader Gilead Sciences (GILD 0.51%) waits on the FDA review for its combination of Sovaldi and levipasvir, and battles questions over Sovaldi's price tag, Merck is producing data on easy-to-treat populations and Bristol-Myers Squibb has turned global.

Does Merck stand a chance?
Merck has lagged the hepatitis C race, but the phase 2 results from its oral combination of MK-5172 and MK-8742 in genotype 1 patients are quite impressive. Ninety-eight percent of patients showed a sustained virologic response. However, this arm of the study only included 43 treatment-naive and noncirrhotic patients; the entire trial enrolled 471 patients across 16 arms.

Safety data was positive as well; adverse events were primarily minor (fatigue, headache, nausea, diarrhea) and there was no discontinuation due to drug-related side effects.

Merck's drug has gained breakthrough status from the FDA and sales projections are around $400 million assuming approval. Merck's phase 3 clinical results (C-EDGE) are due next year and will help us better understand the drug's potential.

For Merck shareholders, perception of recovery from sluggish research and development activities is almost as important as the scientific data. To that end, Merck has also done well with PD-1 oncology agent MK-3475.

Nonetheless, Merck is struggling amid generic competition, weakness in Januvia sales, and a drought in R&D approvals. It needs to capture some share of the hepatitis C market to revive itself.

Bristol-Myers Squibb makes headway
Meanwhile, Bristol-Myers' daclatasvir-asunaprevir combination revealed in phase 3 data a 90% sustained virologic response in treatment-naive hepatitis C patients with genotype 1b, and response rates in the 80% range for the treatment-resistant population.

Of note, compared to Merck's data, Bristol-Myers included patients with comorbidities such as blood disorders, depression, and cirrhosis. Safety data revealed 1%-3% discontinuation due to adverse effects, with the rate of serious adverse events at 5%-7%.

So while Bristol-Myers' data looks worse than Merck's, the patient population was significantly more complicated.

Large genotype 1b populations exist in Europe and Asia, and Bristol-Myers' study design targeted countries including Taiwan and Korea, showing a global focus. Genotype 1 is the most prevalent genotype of hepatitis C, with 1b more common Europe and 1a more common in the U.S.

The combination was filed for FDA approval earlier this week and enjoys breakthrough status. Analysts suggest sales projections of over $1 billion in 2018. Like Merck, Bristol-Myers also has focus on PD-1 oncology agents with nivolumab.

Gilead's response?
An FDA decision on Gilead's Sovaldi with ledipasvir combo is expected in October. Sovaldi is barreling its way toward multibillion-dollar territory, and that return will give Gilead an unmitigated edge in both being perceptually the leader in the field and the financial leader.

Who decides the winner?
A drug is only as good as its marketability, and health insurers and Medicaid programs have been pushing back on Sovaldi's cost. Medicaid has already held off on authorization, and Democrats on the House Energy and Commerce Committee issued a letter to Gilead last month questioning the pricing scale and effect on public health.

While Gilead continues to negotiate in the U.S., it has offered a 99% discount on Sovaldi to Egypt, a hotbed for hepatitis C. It also announced plans to allow generics in India.

Nonetheless, hepatitis C is unique in that there is often not a huge time crush for starting patients on therapy. As a result, just being in the pipeline with stellar results could afford developers enough hype to have physicians wait for approval before initiating patients on treatment.

Payers led by Express Scripts are already looking past Sovaldi's $84,000 price tag for the next affordable alternative. Merck and Bristol-Myers, as well as rival AbbVie, may offer that alternative, one that payers will likely jump on.

It will be hard to overtake Sovaldi independently, but the game for combination pills is anyone's field. The patient population is also not homogenous. Merck has clearly proven safety and efficacy in easier-to-treat patients while Bristol-Myers Squibb seems to be targeting global hepatitis 1b patients. Gilead and Merck's combination treatments are once-daily single pills, with AbbVie and Bristol-Myers' treatments requiring more pills. With a global market of over 170 million patients, it seems there is room for each to carve out its own niche -- the question is, how big will each niche be?