Johnson & Johnson's (NYSE:JNJ) been elbow deep in cutting-edge hepatitis C research for years and those efforts have led to big treatment advances and top selling drugs, including Incivek and Olysio. However, J&J's hepatitis C drugs have recently been relegated to bit-player status by Gilead Sciences' (NASDAQ:GILD) Sovaldi and Harvoni, two drugs that work so well they've become doctors' go-to HCV treatment option.
Although J&J has been overtaken by Gilead Sciences in the HCV market, J&J isn't giving up the fight. In fact, it's doubled down on hep C research by acquiring Alios BioPharma last year and licensing Achillion Pharmaceuticals' (NASDAQ:ACHN) promising HCV pipeline earlier this year.
Now J&J plans to team up the various hepatitis C medicines its cobbled together in a mid stage trial that it hopes will halve the treatment time required by Gilead Sciences drugs.
A massive market opportunity
There are roughly 3 million people infected with hepatitis C in the U.S. and as many as 170 million people globally have the disease and as a result, drugs that are used to treat hepatitis C have become instant blockbusters following their approval.
Currently, the treatment market is dominated by Gilead Sciences' Sovaldi, which won the FDA go ahead in December 2013, and Harvoni, which got the green light a year ago.
Sovaldi is a pan-genotype nucleotide inhibitor that targets the NS5B enzyme critical to hepatitis C replication and in trials, Sovaldi delivered cure rates in the low 90% range without the need for co-administering side affect laden interferon, a long-standing HCV treatment, in most patients. As a result, Sovaldi is widely used to treat patients diagnosed with the non-genotype 1 variation of hepatitis C.
Patients with genotype 1 are typically treated instead with Harvoni, a mash-up of Sovaldi and Gilead Sciences' NS5A inhibitor, ledipasvir. In trials, Harvoni delivered cure rates in the high 90% range without the need for both interferon and ribavirin, another side affect laden drug that was historically used to treat HCV.
The combination of market leading efficacy and safety and the important bonus of reducing treatment time from the prior standard of 24 weeks to 12 weeks, or less, for many patients has turned both of these drugs into multibillion dollar blockbusters. In Q2 alone, Gilead Sciences racked-up almost $5 billion in combined sales from these two drugs.
Elbowing for a seat at the table
J&J's Olysio, a NS3/4A inhibitor that helps prevent HCV from maturing, got the regulatory nod in November 2013 and although it wasn't as successful at treating HCV as Sovaldi, doctors discovered that teaming it up with Sovaldi helped many tough-to-treat patients.
As a result, J&J notched $2.3 billion in sales from Olysio last year, however, most of those sales occurred prior to Harvoni's approval.
Since Harvoni's launch, Olysio's sales have slowed to a trickle, totaling just $79 million in the third quarter.
In a bid to recover market share lost by Olysio's sliding sales, the company has made big investments to bulk up its HCV drug pipeline. Last year, J&J acquired Alios BioPharma to get its hands on AL-335, a NS5B inhibitor that works similarly to Sovaldi, and this past summer, J&J licensed Achillion's NS5A inhibitor, ACH-3102, a drug that works similarly to Gilead Sciences' ledipasvir.
The company plans to see if those two drugs can be added to Olysio to create a three-drug combination therapy that could leapfrog Gilead Sciences via a phase 2 trial of the three-drug combination that should begin soon. Although the trial will focus primarily on safety, it will also see how effective these drugs are at curing HCV over four week, six week, and eight week treatment cycles.
Results from this mid stage study should be available next year and if we assume that efficacy for these drugs will be similar to what we've seen in the past, then the big question won't be whether or not J&J's combination approach works, but whether or not it significantly reduces treatment time.
If J&J can achieve similar cure rates to Gilead Sciences Sovaldi and Harvoni in multiple genotypes over a shorter treatment period, then patients and insurers will likely flock to it because of convenience and potential cost-savings. However, before investors count Gilead Sciences out, they should know that Gilead Sciences is also evaluating increasingly shorter treatment times, so this is likely to be a contentious foot-race between the two companies in 2016.