G

Source: Gilead Sciences

It shouldn't be too shocking to learn that sales of Gilead Sciences(NASDAQ:GILD) mega blockbuster Sovaldi sagged in the third quarter. After all, prescriptions written for Sovaldi declined steadily throughout the quarter ahead of the widely anticipated FDA approval of Gilead Sciences next-generation hepatitis C drug, Harvoni.

So while sales of Sovaldi may be disappointing to some, it shouldn't be. In fact, if anything, investors should be encouraged by the fact that so many patients were warehoused for treatment last quarter that Harvoni is virtually guaranteed to be a blockbuster drug right out of the gate.

G

The back story
Sovaldi was one of a new class of oral hepatitis C drugs. It won FDA approval just days after
Johnson & Johnson's (NYSE:JNJ) Olysio, but thanks to best-in-class efficacy, Sovaldi was unquestionably the best treatment option for hepatitis C patients heading into 2014.

And that best-in-class standing didn't disappoint. In the first six months on the market, Sovaldi generated sales of more than $5.7 billion for Gilead. Add in the $2.8 billion in third-quarter sales and Sovaldi revenue handily eclipsed $8 billion in its first nine months on the market.

Sovaldi's success is due to the shortfalls of prior generation treatments.

Up until a few years ago, hepatitis C therapy involved taking a combination of peginterferon and ribavirin for as many as 48 weeks. Patients taking those drugs suffered from a pesky slate of side effects that made them feel like they were continuously suffering from the flu. But what really made that treatment regimen less than appealing was its coin-flip 50% cure rate.

So Vertex Pharmaceuticals (NASDAQ:VRTX) invented a better mousetrap. Vertex's Incivek won over FDA regulators in 2011 and demand for the drug was so strong that Incivek became the fastest drug ever to reach billion dollar blockbuster sales status. Yet while Incivek was a better therapy than the peginterferon and ribavirin combination, it was still far from perfect. Patients were still required to take peginterferon and ribavirin; the treatment courses were still onerous at 24 weeks; and just 80% of patients treated with Incivek achieved a functional cure.

G

Source: Gilead Sciences

Ripe for change
The inability for these injection based therapies to cure the disease in most patients created a big opportunity for Gilead to win market share with Sovaldi, a pill that could be taken once a day. Sovaldi not only cut the treatment time for most patients to just 12 weeks, but it also delivered cure rates in the low 90% range.

Those advantages were enough to prompt doctors to hold off on treating all but the most at-risk patients with Incivek ahead of Sovaldi's approval. As a result, pent-up demand propelled Sovaldi's sales to $140 million in just its first few weeks on the market and allowed Sovaldi to eclipse the $2 billion sales mark in its first full quarter and $3 billion in sales in its second quarter on the market.

And that's why you shouldn't worry about Gilead's third-quarter Sovaldi sales "slide" to $2.8 billion. Because Gilead's latest drug -- Harvoni -- is equally revolutionary to Sovaldi, that suggests doctors are eagerly anticipating it and there's significant pent-up demand that is likely to send Harvoni sales soaring this quarter.

Harvoni's cure rates are as high as 99%, far better than Sovaldi's, and Harvoni can also be dosed over eight weeks instead of 12 weeks for roughly 40% of patients. Most importantly, Harvoni finally does away with peginterferon and ribavirin once and for all.

Looking forward
Just as Sovaldi sales rocketed higher following its launch, I wouldn't be surprised to see Harvoni come charging out of the gate, too.

Harvoni is a better drug than Sovaldi and the hepatitis C patient population that still requires treatment is massive. As many as 170 million people have hepatitis C worldwide, including 2.7 million people in the United States.

Since Sovaldi's $8 billion in sales were generated by treating just 100,000 patients in the U.S. and 17,000 patients overseas, there's significant running room remaining for Harvoni in 2015, and that suggests that investors would be wise to take the long view of the broader opportunity, rather than to focus on the short term drop-off in Sovaldi sales.

Todd Campbell owns shares of Gilead Sciences. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends Gilead Sciences, Johnson & Johnson, and Vertex Pharmaceuticals. The Motley Fool owns shares of Gilead Sciences and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.