Has Gilead Sciences, Inc.'s Star Drug Already Peaked?

Gilead Sciences' (NASDAQ: GILD  ) hepatitis C drug scored $3.5 billion in sales in the second quarter, but prescriptions have been falling since before the quarter closed.

First, new prescriptions started to fall in March. And then, as you'd expect, total prescriptions, which includes refills, peaked a couple of months later. There isn't necessarily a direct correlation between prescriptions and sales because we don't know how much the remaining patients are paying for the drug, but it appears as if Sovaldi sales in the third quarter will be lower than in the second quarter.

Source: Bloomberg Intelligence.

Fret not
It's just warehousing.

Again.

While prescriptions for Sovaldi have peaked and will decline further, demand for drugs containing Sovaldi will pick up once Gilead's Sovaldi-ledipasvir combination is approved by the Food and Drug Administration later this year.

In fact, that's the reason for the decline in Sovaldi prescriptions. Hepatitis C is a very slow-developing disease. For patients who haven't progressed so far that they're experiencing liver damage, getting treatment now or in six months isn't going to make much of a difference.

We saw this same phenomenon with Vertex Pharmaceuticals' (NASDAQ: VRTX  ) Incivek. U.S. sales peaked in the fourth quarter of 2011 as doctors anticipated the 2013 approval of Sovaldi, which has better efficacy than Incivek.

The main advantage of Sovaldi-ledipasvir isn't necessarily on the efficacy side, but Sovaldi-ledipasvir can be taken alone, while many hepatitis C patients currently have to take Sovaldi with difficult-to-tolerate injected interferon. Beyond the lack of injections, the all-oral combination is a huge advantage because of the flu-like symptoms that many patients experience with interferon.

Source: Gilead Sciences.

I'm actually rather surprised Sovaldi has done as well as it has; I figured only patients whose disease had substantially advanced since the launch of Incivek would take Sovaldi, and the rest would wait for the all-oral treatment.

Off-label combinations
Part of the better-than-expected sales likely has to do with Johnson & Johnson (NYSE: JNJ  ) gaining FDA approval for Olysio. The drug can be used in combination with Sovaldi without the need for interferon, although it hasn't been approved for that indication.

Bristol-Myers Squibb's (NYSE: BMY  ) Daklinza can also be used in combination with Solvaldi and was given a thumbs up by European regulators this week for the combination. In the U.S., Daklinza is up for approval in combination with another Bristol-Myers drug, Sunvepra, but Daklinza could be used off-label with Sovaldi once it's approved here, especially since Daklinza-Sovaldi appears to have better efficacy than Daklinza-Sunvepra.

These combinations have the potential to lower Gilead's sales, assuming Gilead charges more for Sovaldi-ledipasvir than it does for Sovaldi alone. To get around this issue, Gilead could set the price of Sovaldi-ledipasvir at the current cost of Sovaldi plus interferon, and then raise the price of Sovaldi to the same as Sovaldi-ledipasvir, making the use of Sovaldi combined with a drug from a different company more expensive than Sovaldi-ledipasvir.

The next round of warehousing
Merck
(NYSE: MRK  ) is working on an all-oral treatment that could have a shorter treatment time. So is Gilead. If they're successful in the clinic, doctors could stop using Sovaldi-ledipasvir (or combinations of Sovaldi and other drugs) and wait for the approval of the faster-acting combination.

Longer term, we could see another warehousing event as the drugs approach their patent life. If generic drugs are a year away, patients may be willing to wait that long to get reduced co-pays.

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream team responsible for this game-changing blockbuster. CLICK HERE NOW.


Read/Post Comments (0) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3085786, ~/Articles/ArticleHandler.aspx, 12/19/2014 5:50:06 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement