In order for biotech companies to be successful they need to do two things very well: get drugs approved by the Food and Drug Administration and properly launch their approved drug.
Even as recently as a decade ago the latter part didn't matter nearly as much since a slower FDA review process and a thinner field of drugs meant competition was unlikely to be as fierce. Today, as we've seen repeatedly, getting a drug approved by the FDA gives no assurances of its success no matter how well it performed in clinical trials. Just ask Dendreon shareholders who had bet the farm on advanced prostate cancer treatment Provenge if you don't want to take my word for it!
Yet, when it comes to drug approvals and especially drug launches, perhaps we should be taking our pens and notepads out and taking critical notes from Gilead Sciences (NASDAQ: GILD). Earlier this week Gilead reported its third-quarter earnings results and demonstrated year-over-year revenue improvement of – get this – 138%! The company's four-in-one in-house HIV-1 treatment Stribild delivered a more than doubling in sales to $328 million, but the real talk of the town was hepatitis C medication Sovaldi which delivered $2.8 billion in quarterly sales.
Now here's the really intriguing part: Gilead Sciences stock actually fell after reporting its earnings since Sovaldi's sequential quarterly sales fell from $3.48 billion in the second quarter to "just" $2.8 billion in Q3. Boohoo, right? I doubt many investors are too concerned either.
Five amazing Sovaldi statistics
In fact, here are five staggering statistics about hepatitis C drug Sovaldi that just might knock your socks off.
1. Through the first three quarters of 2014 Sovaldi sales have totaled a staggering $8.55 billion. To put that into context, only two drugs in the entirety of 2013 over four quarters generated more revenue globally than Sovaldi. These were Amgen's anti-inflammatory drug Enbrel, which generated worldwide sales of $8.78 billion, and AbbVie's (NYSE:ABBV) anti-inflammatory drug Humira which leapt to $11 billion in worldwide sales. In short, Sovaldi may wind up as 2014's second-best-selling drug behind only Humira.
2. The previous hepatitis C standard of care, Incivek, which was manufactured by Vertex Pharmaceuticals (NASDAQ:VRTX) was the fastest growing drug in the world until Sovaldi came along. In two quarters and change Incivek hit $1 billion in cumulative sales. For Gilead's Sovaldi it took just a few weeks.
3. Through the first nine months of the year competing hepatitis C drugs Olysio ($1.98 billion) made by Johnson & Johnson (NYSE:JNJ), Pegintron ($300 million) and Victrelis ($132 million) made by Merck (NYSE:MRK), and Incivek ($10.3 million) by Vertex, combined for $2.42 billion in sales. Sovaldi did more than that in the third quarter!
4. For a standard 12-week treatment course, Sovaldi will cost $84,000, or $1,000 per pill, per day. In contrast, Olysio prices out at $66,000 for a full treatment course, Incivek a hair over $49,000, and Victrelis anywhere from $31,000 to $53,000.
5. Finally, as further evidence that the U.S. pharmaceutical market subsidizes the rest of the world, Gregg Alton, Gilead's executive vice president, noted at a news conference recently that Gilead plans to sell Sovaldi in India for – wait for it -- $10 per pill. That's right, just 1% of the cost for Sovaldi in the U.S.
Gilead's hepatitis C empire is about to grow bigger
Simply put, these statistics are both incredible, shocking, and potentially irritating. But, there's no denying that Sovaldi is a game-changer. Prior to Sovaldi the sustained virologic response for Incivek was 79% for treatment-naïve patients and between 32% and 86% for previously treated patients. Sovaldi, on the other hand, delivered curative rates among most genotypes of 90% or higher. And here's the thing with Sovaldi: it's getting even better.
Just weeks ago the FDA approved Harvoni, Gilead Sciences cocktail drug that combines Sovaldi with ledipasvir into a once-daily pill for genotype 1 patients. This pill can be administered without the need for a ribavirin or interferon, which has been shown to cause nasty flu-like symptoms in patients. More importantly, genotype 1 constitutes the majority of all hepatitis C cases, thus Gilead now has Harvoni for interferon-free genotype 1 treatment, and Sovaldi for genotype's 2 and 3 without interferon. Not to mention certain instances allow for patients to be treated in as little as eight weeks.
Et tu, AbbVie?
Of course, a curative rate in excess of 90% also comes with a heftier price tag of $94,500 for a 12-week treatment course, up from $84,000 for Sovaldi. Because insurers and pharmacy-benefit managers are struggling to justify the retail cost of Sovaldi, it's possible that PBM's could remove Sovaldi and/or Harvoni from their approved medications list and instead opt to cover AbbVie's direct-acting antiviral hepatitis C combo drug if it gains FDA approval. This remains perhaps the biggest concern Gilead shareholders have to contend with.
Going forward investors shouldn't be shocked to see Sovaldi sales drop from their current record-setting pace for two particular reasons. First, Harvoni sales are going to replace Sovaldi in certain treatment types. This isn't in any way a loss for Gilead – in fact, Harvoni's higher price per pill could actually mean more profitability for the company. Best of all, Harvoni's minimal side effects for genotype 1 patients mean a higher quality of care for patients.
Secondly, Gilead can't discount the fact that competition in hepatitis C is ramping up. AbbVie's combo drug will likely be approved by the FDA, Merck is working on advancing its own hepatitis C combo, and Johnson & Johnson has made no qualms about continuing its own hepatitis C research. Not to mention, there are close to a half dozen additional publicly traded companies also attempting to develop HCV treatments.
This doesn't mean Sovaldi will go way the way of Incivek by any means, but it may be unlikely to duplicate the $10 billion-plus in sales it's on pace for this year moving forward.
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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