Bristol-Myers Squibb (BMY -8.51%) said on Tuesday that it's pulling the marketing application for its hepatitis C combination daclatasvir and asunaprevir because of a "rapidly evolving hepatitis C treatment landscape."

Sure, Gilead Sciences (GILD -2.70%) looks likely to get Harvoni approved shortly and AbbVie (ABBV -0.30%) has a soon-to-be-approved cocktail, but I'm not sure I'd call the changes "rapid." Nothing in drug development is really rapid. Clinical trials and FDA approvals take time and everyone can see them coming.

Bristol-Myers Squibb has known that Gilead Sciences was developing Harvoni, a combination of Sovaldi and ledipasvir, since Gilead left Bristol-Myers at the altar a couple of years ago, refusing to develop a combination of Sovaldi and daclatasvir.

Bristol-Myers licked its wounds and tested daclatasvir with asunaprevir. Unfortunately, the combination isn't nearly as potent as Harvoni, presumably leading to the decision to not bother developing the combination in the United States.

But why now? Nothing has really changed on the competitive landscape since Bristol-Myers submitted its application for daclatasvir and asunaprevir back in April. And in July, Japanese regulators approved daclatasvir and asunaprevir, which are marketed as Daklinza and Sunvepra, respectively, so it seems unlikely there's some hidden problem that would cause the FDA to turn down the drugs.

Here are a couple of possibilities for that decision:

Source: Bristol-Myers Squibb.

If you can't beat 'em, join 'em
Bristol-Meyers is still pursuing Food and Drug Administration approval for Daklinza on its own. Best-case scenario, the decision was because the FDA gave Bristol-Myers an indication that the data from clinical trials testing Daklinza combined with Sovaldi -- curing up to 100% of patients in some trials -- will be on Daklinza's label. If the combination is approved, Daklinza might actually be able to compete with Harvoni in the United States, EU regulators signed off on the approval of Daklinza in August and said it could be used in combination with Sovaldi.

Of course, Gilead Sciences can discourage the combination by pricing Sovaldi and Harvoni at close to the same price, making a Sovaldi-Daklinza combination much more expensive than Harvoni. Insurers aren't likely to pay the higher cost for a modest increase in efficacy.

Triple combo
Bristol-Myers is testing a third drug, dubbed BMS-791325, with daclatasvir and asunaprevir in hopes that it can cure upwards of 95% of patients, the level required to compete with Harvoni and AbbVie's (ABBV -0.30%) soon-to-be-approved cocktail.

The combination is being tested in four phase 3 trials, dubbed Unity 1-4. Top-line data from the first two trials were released Wednesday ahead of the American Association for the Study of Liver Diseases meeting next month.

In Unity 1, the triple-drug combination produced cure rates of 92% in patients that were new to therapy and cured 89% of patients that had failed previous treatments. In Unity 2, which enrolled patients with cirrhosis of the liver, 93% of new-to-treatment patients were cured by the triple combination. Adding a fourth drug, ribavirin, increased the cure rate to 98%. As expected, treatment experienced patients were lower with cure rates of 87% and 93%, with and without ribavirin, respectively.

While nothing to get too excited about, the triple combination is in the range where it can compete with Harvoni. Bristol-Myers may have pulled the daclatasvir-asunaprevir application because it knows the triple-drug combination is much better, making the two-drug combination not worth pursuing because it'll be short lived as a treatment (if anyone even bothered to use it).