The advisory arm of the European Medicines Agency has recommended approval for AbbVie's (NYSE:ABBV) three-pill daily hepatitis C cocktail, putting AbbVie on track to challenge Gilead Sciences' (NASDAQ:GILD) dominant position in Europe early next year.
A battle coming?
The decision by the Committee for Medicinal Products for Human Use to endorse approval of AbbVie's Exviera and Viekirax (the two drugs used in the three pill cocktail) for use in hepatitis C patients should result in an official approval from the EMA in the first quarter of 2015. If approved, patients will need to to take Viekirax once daily and Exviera twice daily.
Whether Gilead Sciences should be concerned about the threat of mounting competition in Europe isn't yet certain. Gilead Science's Harvoni is a single-pill treatment taken once a day, which is much friendlier than AbbVie's new cocktail's dosing schedule. And, since both companies' compounds have very good functional cure rates, AbbVie's ability to win away market share will probably have to come from cheaper prices.
AbbVie hasn't yet provided insight into its pricing plans, but it's unlikely that AbbVie will price its cocktail significantly less than the $94,500 that Gilead Sciences is charging for Harvoni. However, a small price advantage may sway some health care payers to include AbbVie's regimen in their formularies instead of Harvoni.
Such a move by payers, however, could result in prescriber and patient pushback, since Harvoni arguably posted better cure rates during its clinical trials.
While AbbVie's three-drug cocktail did produce cure rates as high as 99% in genotype 1b patients, which account for about one-third of genotype 1 cases, AbbVie's treatment cured just 90% of the more common 1a variation. That fell short of the 94% and higher cure rate delivered by Harvoni in genotype 1a patients. Adding ribavirin to AbbVie's cocktail boosts cure rates to 97%, but doctors have been moving away from, not toward, treatment regimens relying on side-affect laden ribavirin, so it's unclear how many doctors would favor such an approach,
AbbVie's regimen may also need to overcome the hurdle of treatment duration. In about 40% of cases, patients may be treated with Harvoni over eight weeks, rather than 12 weeks, while AbbVie's therapy requires treatment for 12 weeks across all patients.
Supporting more than one player
That's not to say that AbbVie won't be able to carve out some market share. The global hepatitis C population stands at between 150 million and 170 million people, and the population of hepatitis C patients in Europe totals roughly 9 million. Another 3 million people are infected with chronic hepatitis C in the U.S., too, where AbbVie could win FDA approval for its cocktail in December.
The sheer size of the patient population worldwide suggests that the market is large enough to support more than one therapy. In the U.S. alone, for example, treating every patient for eight weeks, rather than 12 weeks, with Harvoni would still cost payers a staggering $189 billion. Looking at the market opportunity available to hepatitis C drugmakers another way, consider that Gilead Sciences' prior generation hepatitis C drug, Sovaldi, treated 117,000 patients through the first nine months of this year, translating into revenue of more than $8 billion.
The opportunity this suggests
More options for doctors, patients, and payers is a good thing, given that different therapies may allow doctors and health care payers to parse data and prescribe different therapies to different patients based on whichever drug works best.
Such an approach could mean that there is an opportunity for AbbVie to carve away some of Gilead Sciences' market share. However, in my view, there's a much larger opportunity available to drugmakers if they can reduce treatment times below eight weeks. If that's true, then investors should start focusing their analysis less on what are essentially similar cure rates and more on treatment duration.