One of the best drug launches in history has become one of the fastest run downs.
Approved in May 2011, Vertex Pharmaceuticals' (NASDAQ:VRTX) hepatitis C drug Incivek hit $457 million in sales in its second full quarter on the market. Many drugs never hit $457 million in annual sales at their peak.
Less than two years later, sales are down to $86 million in the most recent quarter. You can't say I didn't warn you.
Ironically, what made Incivek so popular to begin with is also what caused the crash. Hepatitis C is a slowly developing disease, so there's a limited downside to patients waiting a few years to be treated if the virus isn't doing much damage to the liver yet.
Doctors could see that Incivek and Merck's (NYSE:MRK) Victrelis were working well in clinical trials, so they cut back on the prescribing the standard of care at the time -- Roche's Pegasys or Merck's Pegintron with a generic called ribavirin -- because they only cured about half the patients and make many people feel like they have the flu.
Once Incivek was approved, the warehoused patients were prescribed Incivek, which had a little better data than Merck's Vicrelis, and sales skyrocketed.
Rinse and repeat
But then doctors heard about the next generation of drugs and started warehousing again. Doctors are going to prescribe Johnson & Johnson's (NYSE:JNJ) simeprevir and Gilead Sciences' (NASDAQ:GILD) sofosbuvir, which both look like they're going to get approved this year after getting unanimous endorsements from their respective advisory committees. The large number of drugs in clinical trials also siphoned off some patients.
Vertex has seen the writing on the walls, so the biotech is cutting 370 positions, about 15% of its workforce, to conserve cash while it ramps up its cystic fibrosis business. Vertex also has a next-generation hepatitis C drug, VX-135, but it'll take a few years to get approved -- if side effects don't kill it first -- so it doesn't make sense to keep the hepatitis C sales force on the payroll.
All those workers can find new homes at Johnson & Johnson or Gilead Sciences. At least until doctors start warehousing again.