Image source: Gilead Sciences.

The fact that Gilead Sciences (NASDAQ:GILD) shares have toppled by 8% since July might have you thinking that competitors have the company on the ropes, but Gilead Sciences' third-quarter results show investors that simply isn't the case.

Holding off competitors
The biggest argument for avoiding Gilead Sciences had been that it's unlikely to maintain its dominance in hepatitis C treatment in the face of mounting competition, but following the introduction of AbbVie's (NYSE:ABBV) Viekira Pak this past January, that's exactly what Gilead Sciences has done.

Despite AbbVie's genotype 1 hepatitis C cocktail winning exclusivity on the nation's largest pharmacy benefit formulary, Viekira Pak's sales have barely put a dent in Gilead Sciences' top line.

Last quarter, AbbVie reported that Viekira Pak's sales totaled $469 million, and while that's certainly a healthy run rate, it pales in comparison to Gilead Sciences' Harvoni, which racked up $3.33 billion in revenue last quarter.

Moreover, sales of Viekira Pak, which is undeniably an important weapon against this disease, also trail Gilead Sciences' Sovaldi, which had revenue of $1.46 billion last quarter and aren't that much higher than Bristol-Myers Squibb's two hepatitis C drugs, which posted combined sales of $402 million in Q3.

Although AbbVie and Bristol-Myers' more recently-approved drugs are selling at billion blockbuster rates, their impact has been more to expand the market for hepatitis C treatment than to cut into Gilead Sciences' prescription volume. As evidence of this, Gilead Sciences has treated 190,000 hepatitis C patients in the U.S. during the first nine months of this year, and that's already far more than the 140,000 patients the company treated in the U.S. during all of 2014.

Gilead Sciences could still stumble if Merck & Co (NYSE:MRK) gets the go-ahead for its two-drug hepatitis C therapy on January 28; however, I think Merck's drug will prove to be a bigger threat to AbbVie than it is to Gilead Sciences.

Image source: AbbVie.

Merck's therapy and Gilead Sciences' Harvoni are both one-pill per day regimens with similar efficacy, and both drugs will be primarily used in genotype 1 patients, but while Merck's drug is dosed over 12 weeks, Harvoni can be dosed over eight weeks in more than 40% of genotype 1 patients, and that's an important advantage that could insulate Harvoni's market share.

Merck's drug is, however, an arguably better drug than AbbVie's Viekira Pak, which requires multiple pills per day, often with the co-administration of ribavirin. Additionally, Viekira Pak has recently been associated with causing additional liver damage in patients with pre-existing liver disease, and that could result in doctors being more willing to consider using Merck's drug instead.

Looking ahead
Gilead Sciences could be in a position to fend off competitors with its existing drugs, but it recently reported impressive phase 3 results for a next-generation hepatitis C drug that could really solidify Gilead Sciences' pole position in the indication.

During late-stage trials that included patients across the six genotypes, this new drug delivered 83% to 100% cure rates. Importantly, the drug's performance suggests it could become a pan-genotype therapy (even in patients with existing liver damage) that eventually eliminates the need for genotype testing -- something that would be helpful in emerging nations with a limited healthcare infrastructure.

Gilead Sciences is also conducting other studies that could shorten treatment duration for many patients, and in my opinion, it's these studies that could be the most important to Gilead Sciences' long-term success in the indication. Reducing treatment duration improves adherence, and if all other things are equal, then the shortest-duration therapy stands the best chance of winning over doctors and patients.

Regardless, the evidence from this year suggests that Gilead Sciences' efforts are allowing it to successfully maintain its leadership in hepatitis C, and absent a more competitive threat, it's hard to imagine Gilead Sciences' hepatitis C sales will be heading south anytime soon.