Right on the tail of EU approval for its hepatitis C treatment Sovaldi (sofosbuvir), Gilead (GILD 2.73%) has filed for FDA approval of its highly anticipated oral combination pill of ledipasvir and sofosbuvir.

This fixed-dose combination would be the first oral treatment that is completely both interferon and ribavirin free, targeted for patients with genotype 1 HCV infections. The Phase III studies showed efficacy of the combination without ribavirin or interferon within 8 weeks in refractory hepatitis C patients, with cure rates up to 99%.

Approval is largely expected from the FDA for the breakthrough-designated drug with the treatment going to market this year. All trials have shown excellent results for both safety and efficacy.

Sovaldi expects to top around $7 billion in peak sales if this combination is approved. Sovaldi itself was only approved last December in the U.S. and Canada and this past January in the EU. Despite having less than a month on the market in 2013, Sovaldi's fourth quarter sales neared $140 million. It certainly looks on its way to being Gilead's latest blockbuster drug. However, it should be noted that of that $140 million, less than half of that was actual patient demand – the remainder was accounted for by $70 million in initial inventory orders from three major wholesalers and $15 million in a one-time order for clinical trials.

On the whole, Gilead's financial health is quite strong – it recently released fourth quarter results showed its earnings per share and revenue both beating estimates, at $0.47 per share and $3.12 billion, respectively.

AbbVie still a major contender
Earlier this month, AbbVie (ABBV 1.11%) also released its own news on its combination hepatitis C therapy showing promising Phase III data for its three-drug combination regimen with ribavirin. Besides the fact that AbbVie has not yet filed for approval, its combination also lags Gilead's clinically. The efficacy is comparable, but AbbVie's combination still requires ribavirin and comes as multiple pills a day as compared to Gilead's single once-a-day pill. Gilead's combination has the option of use with ribavirin, but showed better efficacy than AbbVie's therapy when used without ribavirin. As for the question of dosing, AbbVie has already formulated a once-daily pill version of its combination regimen, but it still needs to undergo testing.

Nonetheless, AbbVie is still very much a competitor to Gilead. It expects its own FDA filing next quarter and launch by the end of 2014. However, estimated sales peaks at $3 billion a year are sparking discussion of a potential price war between AbbVie and Gilead as a way to fight for market share, especially as Gilead takes heat for the $84,000 price tag on a single treatment course of just Sovaldi. Neither company has a price yet for their combination therapies.

Is this stock even in the race?
Bristol-Myers Squibb
(BMY 0.63%) lags the other two in developing a combination therapy, but it is not completely out. It was rejected by Gilead for a partnership to develop a combination therapy as Gilead (obviously) focused on the in-house combination that it has now filed for approval for.

Meanwhile, Bristol-Myers is still pending approval for just daclatasvir in Europe, hoping that may pave the way for US approval as well. Bristol-Myers is certainly behind in developing a combination regimen, but approval of daclatasvir would open the door to off-label combinations, very possibly even with Gilead's Sovaldi. This combination has already shown excellent results in clinical trials.

Bottom line
The real race for 2014 is clearly between Gilead and AbbVie. As far as estimates go, neither Gilead nor AbbVie included sales from their yet-to-be approved combination therapies in their earnings estimates. As a result, if both companies gain approval as they are expected to, both will also likely to be on track to beat expectations.

However, as compared to Gilead's above-estimate fourth quarter earnings, AbbVie recently reported below-estimate fourth quarter earnings and a less optimistic 2014 forecast than Gilead's. Meanwhile, Gilead's peak sales estimates for Sovaldi are more than double that of AbbVie's. While there is talk of a price war, it is unlikely it would equalize the playing field enough to make up for the $4 billion difference in peak sales.

Gilead's new combination is still slightly better than AbbVie's, largely in part to its once-daily, single-pill dosing. While AbbVie is developing its own simplified regimen, it will not hit markets this year. As a result, Gilead is still staunchly the leader in this race and will likely remain so for the rest of the year.