Around 20 million Americans are at risk of liver failure, thanks to a poorly understood epidemic sweeping the nation -- and many don't even know it. Non-alcoholic steatohepatitis (NASH) is a huge problem, and drugmakers big and small are racing with each other to develop the first available treatment.
Gilead Sciences (GILD 0.91%) pours more resources into developing an effective NASH treatment than any of its peers. Unfortunately, the candidate from Gilead's NASH program that was closest to the finish line recently failed. Here's what you need to know about what happened and how Gilead's NASH program can bounce back.
Image source: Getty Images.
What happened?
Selonsertib, an ASK1 inhibitor, was Gilead's most advanced NASH candidate. In February, we learned that it failed to reduce fibrosis for advanced-stage NASH patients with cirrhosis in a phase 3 study. More recently, selonsertib also failed to make a significant difference for NASH patients in an earlier fibrosis stage.
Luckily, Gilead Sciences was one of the first big biotechs to operate its NASH program under the assumption that one drug alone wouldn't do the job. Thanks to the company's forward thinking, Gilead Sciences' investors have at least two reasons to remain optimistic.
1. A great combination
Roughly one-third of adults in the U.S. have non-alcoholic fatty liver disease (NAFLD). We don't really know why some experience inflammation and others don't. We do know that lowering the amount of fat stored can halt inflammation of the liver, and recent results say a combination therapy in Gilead's pipeline can accomplish this task.
It looks like the combination of an FXR agonist called cilofexor and an ACC inhibitor called firxocostat make a pretty good team. Firxocostat inhibits fat formation, while cilofexor targets a bile acid receptor known to regulate lipid storage in the liver.
Investigators dosed 20 NASH patients with cilofexor plus firxocostat, and the results were better than expected. A surprising 74% achieved a liver fat reduction of 30% or better.
Viking Pharmaceuticals (VKTX -1.93%) has gained a lot of attention lately because its thyroid receptor agonist VK2809 helped 83% of patients reduce the fat content in their livers by 30% or more. While this looks a lot better than Gilead's combination, it's important to bear in mind that Viking treated patients with NAFLD, not NASH. Persistent inflammation and previous damage can impede a NASH patient's response to treatment, which makes Gilead's combo therapy results arguably more impressive.
Image source: Getty Images.
2. Three's company
Gilead Sciences and diabetes-care specialist Novo Nordisk (NVO -0.03%) recently agreed to a combination study with Novo's new type-2 diabetes treatment, Ozempic. Ozempic offers a weekly injection that nudges the pancreas to produce more insulin of its own instead of frequently injecting it.
Novo Nordisk has already submitted an application for an oral version of Ozempic to the Food and Drug Administration (FDA), and it could end up as part of a three-drug combination with Gilead's cilofexor and firxocostat. The vast majority of people with NASH also have type-2 diabetes, and a three-drug oral combination could achieve two goals with a single capsule.
Earlier this month, Novo Nordisk agreed to test Ozempic with cilofexor plus firxocostat as a triplet therapy for NASH patients. If it works as intended, this could be the first big NASH therapy on the market.
What's next?
Viking Therapeutics hasn't started a phase 3 study yet, but there's a potential first NASH treatment from Intercept Pharmaceuticals (ICPT) that could be on the way. Ocaliva is a bile acid analog that significantly improved fibrosis without worsening NASH activity.
Intercept's Ocaliva results are technically good enough to support an application, but there were some safety concerns with the effective dosage. Ocaliva's already used to treat a less common disorder, and it's been associated with patient deaths when the initial dosage was too high. That means there's a chance the FDA will ask Intercept to come back later with more safety data.
NASH is a heterogeneous disorder influenced by a myriad of genetic, behavioral, and environmental factors. Even if Ocaliva earns approval to treat NASH, it's a one-drug-treats-all solution and probably isn't going to work for as many patients as Intercept investors are expecting.
Gilead's early focus on combining different candidates could save its NASH program from collapsing and give it a chance to come roaring back. First, we'll need to see if cilofexor and firxocostat can repeat their results with a larger trial that includes a placebo group.
Image source: Getty Images.
A buy now?
In 2018, sales of Gilead's hepatitis C virus (HCV) products fell to $3.7 billion from $9.1 billion a year earlier. In response, investors have pushed the stock 37% lower over the past three years.
While selonsertib isn't going anywhere as a monotherapy, the company's combination approach still has a good chance to produce a blockbuster that could help overcome recent HCV losses. On top of potential new NASH therapies, Gilead's also close to filing a new drug application for an oral rheumatoid arthritis treatment with blockbuster potential.
Gilead Sciences is still highly profitable and trades at just 9.7 times forward earnings estimates. There aren't any guarantees that Gilead will succeed in NASH or arthritis, but at this low price, it really doesn't have to in order to produce a positive return. With very little downside risk and a chance to launch a winning NASH treatment, Gilead Sciences looks like a great stock to buy now.
