This week, Merck (NYSE:MRK) said in its fourth-quarter earnings report that the Food and Drug Administration rescinded the company's Breakthrough Therapy designation for its hepatitis C drug combination. Separately, Gilead Sciences (NASDAQ:GILD) said that its new HIV drug quad pill will receive a standard review.
Both announcements are bad news for the respective companies because the drugs will now take longer to get on the market.
The relatively new Breakthrough Therapy designation allows companies extra interactions from the FDA, as well as the potential to file for approval with less data given the unmet need. The designation almost certainly gives the drug a priority review, and the FDA has been making decisions on many Breakthrough Therapies well ahead of the PDUFA date, the agency's goal for making a decision on a given application. As one example, Pfizer just gained FDA approval for Ibrance, which had Breakthrough Therapy designation for breast cancer, two months before its PDUFA date.
The standard review for Gilead's new quad pill will extend the review by four months compared to what the company could have received with a priority review, which had been the norm for HIV drugs.
Despite the delay, the announcements can be taken as a good sign for patients.
How far we've come
The delays would be bad news for patients if they actually needed the medications and had no other options. But the FDA was right to take away the Breakthrough Therapy designation and grant a standard review for the drugs because the current treatments for hepatitis C and HIV have reached the "good enough" phase.
The current hepatitis C drugs -- Gilead's Harvoni and AbbVie's Viekira Pak -- cure around 95% of patients. Compare that to about 50% cure rates, with some nasty side effects, that we had from the only available drugs a few years ago. That's some serious breakthrough.
But it doesn't leave Merck much to improve upon. It's unlikely that any drug will ever get to a 100% cure rate in a large clinical trial because there will always be patients who don't take their medication properly, or don't show up for the follow-up and can't be tracked down.
Rather than increasing cure rates, Merck's best bet to capture a piece of the hepatitis C market is to try and decrease the time patients need to take the medication. The increased convenience is helpful for patients, but certainly doesn't make it a Breakthrough Therapy.
Meanwhile, Gilead's new HIV quad pill works well, but it isn't that much different than the HIV drug cocktails that are currently approved. In two clinical trials, the drug was found non-inferior to Gilead's Stribild, knocking down the virus in about the same number of patients: 93.1% versus 92.4% in one study, and 91.6% versus 88.5% in the other. Laboratory tests suggest that the new quad pill reduces the potential for kidney failure and decreases in bone mineral density compared to Stribild, but the FDA clearly doesn't see the decrease in side effects as important enough to justify putting the extra resources into reviewing the drug quickly.
Assuming the new quad pill and Stribild are priced about the same, the delay probably won't cost Gilead all that much because the biggest opportunity for the new drug comes from switching patients off of Stribild. Any new-to-therapy patients can go onto Stribild until the new drug is approved, so Gilead isn't really losing sales there. The biggest downfall from the delay is from patients who might come off Stribild because of side effects -- but that's a small minority of patients taking the drug.
Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences. The Motley Fool owns shares of Gilead Sciences. 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.