Gilead Sciences (GILD 0.47%) and Johnson & Johnson (JNJ 0.50%) will face Food and Drug Administration advisory committees this week when the panels review their respective hepatitis C drugs. Advisory committee meetings can be the start of a downfall for a drug's chances for approval, but Gilead and Johnson & Johnson don't appear to have much to worry about.
A means to an end
Gilead's sofosbuvir and Johnson & Johnson's simeprevir are just building blocks of eventual all-oral treatments for hepatitis C. For genotype 1 patients, the most common strain of hepatitis C in the U.S., the drugs will need to be used in combination with one of the injected drugs already on the market: Merck's (MRK 0.17%) Pegintron or Roche's Pegasys.
In addition to genotype 1, Gilead is also asking the FDA to approve sofosbuvir for the other five genotypes. Patients infected with genotypes 2 and 3 virus will get to skip Pegintron/Pegasys and take sofosbuvir with a generic drug called ribavirin. Like genotype 1 patients, those infected with genotype 4, 5, and 6 will still have to take PegIntron or Pegasys with sofosbuvir and ribavirin.
The ultimate goal for Gilead, Johnson & Johnson, and all the other hepatitis C drugmakers is to skip Merck's Pegintron and Roche's Pegasys because -- in addition to needing to be injected -- they often produce annoying flu-like symptoms over the months that patients have to take the drugs.
For now, the drugs will replace the first generation oral hepatitis C drugs -- Merck's Victrelis and Vertex Pharmaceuticals' Incivek -- but aren't likely to reach their full potential until other drugs in development are approved to create an all-oral cocktail.
Tuesday and Wednesday are key
Johnson & Johnson's advisory committee meeting is actually on Thursday and Gilead's is on Friday, but investors will get a first look at what the FDA thinks of the drugs two days before those meetings when the agency publicly releases its briefing documents for the panel members.
I doubt there are going to be any issues with efficacy. The drugs appear to be substantially better than Victrelis and Incivek with clean clinical endpoints. Patients are either rid of the virus or they're not. It's hard to see how the companies could get tripped up.
It's the places where the data are a little more obtrusive to the public that investors have to worry about. Sometimes, for instance, the FDA brings up results from preclinical animal studies, asking the panel of outside experts whether they think the findings are worrisome.
Not that I have any reason to think that'll happen to Gilead or Johnson & Johnson this week.
Neither does anyone else
And that's kind of the problem with the stocks. For both drugs, an approval is widely expected because there haven't been any red flags to think otherwise. There doesn't seem to be much upside to me.
In fact, I wouldn't be surprised to see Gilead go down after the documents are released. There's bound to be something negative in the briefing documents -- the FDA's job is to find every potential issue, no matter how small -- and considering that Gilead is up more than 80% this year, an overreaction wouldn't be surprising.
If you're an owner of Johnson & Johnson, simeprevir is just a small part of the pharma giant's long-term growth plan, so I doubt Johnson & Johnson's stock will react unless something really bad is revealed in the briefing documents.
