Gilead Sciences (GILD -1.15%) investors are probably breathing a little easier. On Tuesday, the company reported positive results from a late-stage study of its most advanced drug, filgotinib. The win is particularly important because Gilead Sciences needs new drugs targeting blockbuster indications to offset sliding sales for its hepatitis C drugs. Does filgotinib's latest data make this biotech giant a stock worth buying?
Delivering the goods
Eager to participate in the multibillion-dollar market for autoimmune-disease treatments, Gilead Sciences licensed filgotinib from Galapagos NV (GLPG -1.06%) in 2015.
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An inhibitor that's highly selective for the JAK1 enzyme, which plays a key role in signaling cytokines that control cell growth and immune responses, filgotinib has had its progress watched closely since it delivered positive phase 2 results in rheumatoid arthritis, a multibillion-dollar treatment market.
On Tuesday, investors got their first look at phase 3 data, and overall it appears impressive. In the 200 mg arm, 69% of patients achieved a 20% improvement on the American College of Rheumatology scoring system, 46% achieved a 50% improvement, and 32% achieved a 70% improvement. These results were statistically significant, with a p-value on each that was less than 0.001.
Importantly, there weren't any cases of deep venous thrombosis or pulmonary embolism, nor were there any "deaths, malignancies, gastrointestinal perforations, or opportunistic infections, including active tuberculosis." The drug was generally well tolerated, and adverse events were "mostly mild or moderate in severity." In the placebo group, 3.4% of patients suffered a serious adverse event. In the 100 mg and 200 mg arm, it was 5.2% and 4.1% of patients, respectively.
A large opportunity
The trial results are positive, but it will need to be confirmed in two other ongoing phase 3 rheumatoid arthritis studies, data from which are expected in the first half of 2019.
The remaining two trials are designed differently from this first trial, though. This first study was a 24-week randomized, double-blind, placebo-controlled study of filgotinib alongside disease-modifying anti-rheumatic drugs in moderately to-severely active rheumatoid arthritis patients who inadequately respond to treatment.
One of the two remaining studies is evaluating filgotinib versus placebo in rheumatoid arthritis sufferers who have an inadequate response to methotrexate, a commonly used first-line rheumatoid arthritis treatment, and the other study is evaluating it as a monotherapy or in combination with methotrexate in patients who haven't yet taken methotrexate.
If all three trials pan out, it would be a boon for Gilead Sciences and Galapagos. Gilead Sciences, which owns about 13% of Galapagos, could pay Galapagos up to $1.35 billion in development and sales milestones, plus royalties north of 20% in the United States. Galapagos has exercised its option to co-develop the drug in various European markets, so it will split profit with Gilead Sciences on filgotinib in Germany, France, Italy, Spain, the U.K., the Netherlands, Belgium, and Luxembourg.
Because there are about 1.5 million Americans with rheumatoid arthritis alone, and spending on rheumatoid arthritis totals over $19 billion, there could be a lot of profit to go around. Widespread use of rheumatoid arthritis treatments is one big reason anti-TNF biologics, including the $18 billion-plus-per-year Humira, are multibillion-dollar blockbusters.
An eventual filgotinib approval wouldn't derail the use of anti-TNFs, but anti-TNFs aren't necessarily ideal therapies. Some people don't respond well to them, they can interact with other medications, and patients can suffer from infections on them. Also, unlike filgotinib, which is taken orally, biologics are injected or infused, which is another disadvantage that could make it smart to buy Gilead Sciences and Galapagos shares because of filgotinib.
