3 Tremendous Growth Opportunities for Gilead Sciences

Gilead (NASDAQ: GILD  ) shares dipped this week following news that Merck is acquiring hepatitis C pure play biotechnology company Idenix, leaving investors questioning how long Gilead's Sovaldi can dominate the market.

For insight into Gilead's future, I turned to Gilead's presentation at the William Blair conference this week for answers, and discovered these gems from Gilead's President John Milligan. Milligan addressed all of Gilead's major programs during the presentation, providing valuable investor insight into the three growth drivers Gilead's c-suite is pursuing.

Source: Gilead Sciences

Milligan on hepatitis C
Milligan wasted little time before diving into Gilead's potential market opportunity in hepatitis C. While Sovaldi notched sales of more than $2 billion in the first quarter, those results may prove the tip of the iceberg given that only a small fraction of the total patient population has been treated.

"Let's look at the market dynamics across the United States where we think there are slightly over 4 million people who are infected. Based on data that's out from the CDC and others, we think about 1.7 million of people are diagnosed, so they know that they have HCV. Of those, about 380,000 patients are under care," according to Milligan.

If those numbers are correct, Sovaldi's sales could have significant running room, given that just 30,000 patients were treated with Sovaldi in the first quarter.

Sales are also likely to head higher thanks to Sovaldi's ongoing roll-out in Europe. "In Europe, we saw a rapid uptake of the product, even though we are on the market only in Germany and France. We are going through pricing and reimbursement discussions across the European Union right now," said Milligan.

In addition to potential in the U.S. and Europe, Milligan also moved up Gilead's timeline for entering Japan, which is another important hepatitis C market. "Japan has a lower prevalence than it does in United States," said Milligan. "But there are still over a million people infected... We expected to be on the market in 2016 and it looks like it will be 2015 now."

Of course a lot of attention has focused on pricing, so Milligan addressed that too. Milligan pointed out that the cost of Sovaldi plus peg interferon and ribavirin for 12 weeks costs rougly $94,000, which is slightly less than the $96,000 to $97,000 it would cost to treat patients with Incivek plus peg interferon plus ribavirin over 24 to 48 weeks.

"So the cost of care for Sovaldi containing regimen is actually less than what the current standard of care was prior to the launch of Sovaldi," concluded Milligan.

Milligan's comments suggest Gilead has no plans to reduce Sovaldi's cost, and suggests that its next-generation ledipasvir and Sovaldi combination drug could carry a similarly high price, particularly given that it eliminates ribavirin and peg interferon for many patients. Gilead will learn whether that pill wins FDA approval on October 10th.

Milligan on cancer
Gilead has a few promising oncology drug candidates, but the company's ultimate goal is to create combination therapies across them.

Source: Gilead Sciences

Gilead is researching three distinct pathways associated with cancer with three drugs: idelalisib, GS-9973, and momelotinib. Since each targets a different pathway, Gilead thinks they may complement one another. "And importantly an opportunity to start to combine these to see if we can get synergy that is better activity... longer response and to do so without adding side effects," said Milligan.

Idelalisib is the closest of these three drugs to market, with a decision date for approval as a treatment for relapsed refractory CLL set for August 6th. Idelalisib is also pending approval as a treatment for relapsed refractory indolent non-Hodgkin's Lymphoma with a decision expected on September 11th.

Milligan on HIV
Gilead remains a dominant force in HIV treatment, posting HIV drug sales of more than $9 billion last year. A lot of those sales came from single tablet combination drugs that have "transformed the treatment of HIV to the point of which it's gone from a short-term death sentence to... a chronic illness that patients will be on not for years, but for decades of therapy," said Milligan.

According to Milligan, a Gilead single tablet drug is included in all five of the most widely prescribed HIV treatment regimens in the U.S. One of those medicines is Stribild, which won FDA approval in 2012, and posted sales of $187 million in the first quarter.

"We are very pleased with the uptake, this is comparing Stribild to Isentress, an integrase inhibitor that was launched by Merck, and we can see that we are at or above their launch trajectory and that was a very successful launch," said Milligan.

As HIV patients live longer (the median age for an HIV patient is more than 50 years old), drugmakers like Gilead will need to create new drugs that reduce side effects, including the loss of kidney function and bone density.

As a result, Gilead is developing tenofovir alafenamide, or TAF, as "a way to deliver tenofovir at a very low dose... you can get higher concentrations of the active ingredient inside lymphoid tissue which is a site of infection... (with) much less exposure to Viread which is known to have side effects, including a decrease in kidney function and also decrease in bone mineral density," said Milligan.

Gilead is currently studying TAF in two phase 3 trials for treatment-naive patients that combine TAF with Stribild, versus Stribild alone. Results from those trials should be available by year end and, if they're good, an FDA filing for TAF could happen next year.

Fool-worthy final thoughts
Merck's Idenix acquisition deepens its hepatitis C franchise, but its not just Merck and Gilead that are working on new hepatitis treatments. Other competitors, including AbbVie, which is developing a three-drug combination therapy, and Bristol-Myers, which hopes to win approval for daclatasvir this year, are also in the hunt. That suggests that competition will be fiercer next year than it is this year. That said, investors should remember that Gilead's future also includes new cancer and HIV drugs that could move shares higher, too.

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