Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Enanta Pharmaceuticals (NASDAQ:ENTA), a biopharmaceutical company that develops small-molecule drugs to treat infectious diseases, tanked as much as 22% after rival Gilead Sciences (NASDAQ: GILD) reported positive late-stage clinical data for three trials involving Sovaldi (previously sofosbuvir) for the treatment of genotype 1 hepatitis-C.
So what: According to the Gilead announcement, Sovaldi, when combined with ledipasvir, demonstrated a sustained virologic response (SVR) – an elimination of detectable levels of the disease -- across all three trials ranging from a low of 93.1% to a high of 99.1%. Furthermore, the Sovaldi/ledipasvir combination without a ribavirin in treatment-naïve patients delivered an SVR of 94% in just eight weeks as opposed to the 12 that Sovaldi was initially approved for.
This could be a potential problem for AbbVie (NYSE:ABBV), whose direct-acting antiviral combo drug, of which Enanta contributes ABT-450, is composed of roughly five or six pills and given over a 12-week regimen compared with Gilead's Sovaldi + ledipasvir combo, which may wind up being nothing more than a single pill. Gilead plans to file for approval for this new regimen in the first quarter of 2014.
Now what: I know it's a relatively unpopular opinion, but there could actually be room for two blockbuster treatments in the hepatitis-C space. Gilead's Sovaldi is showing remarkable results in genotype 2 and 3 patients, especially when it comes to improving patient quality of life since it can be given without interferon, but it could just as easily share the market with AbbVie's DAA-combo, which has been extremely effective in treating genotype 1 patients without the need for interferon. The launch of both of these drugs is what will really determine a "winner" (if you even want to declare one), but I see no reason as to why both can't succeed. That would mean today's drop in Enanta Pharmaceuticals which will net royalties from ABT-450 could represent an intriguing buying opportunity for investors.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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