(By R Chandrasekaran) Biopharmaceutical company Gilead Sciences
' (Nasdaq: GILD
) GS-7977 is moving to Phase III study for treating patients with Hepatitis C and is likely to have a lead over others in market entry. The latest prediction is that its peers may have a minimum one year to take on the company's next generation candidate in developing drugs for Hepatitis C treatment. This could provide the company a major foothold before others enter the space.
While analysts and the market are encouraged by Gilead Sciences' Hepatitis C moving into the third phase of trial, what makes the company's advancement interesting are the delays of a similar programs by its rivals.
Recently, drug maker Bristol-Myers Squibb
) suspended a clinical trial of a similar drug as a result of new safety issues.
Currently, the global market for Hepatitis C is estimated approximately $2 billion and is predicted to reach more than $10 billion in the next ten years. The suspension of Bristol-Myers clinical trial will provide Gilead Sciences' GS-7977 well over a year lead to market.
Gilead's GS-7977 with genotype 2/3 is an easier one to treat Hepatitis C and the drug, in combination with generic ribavirin, could get its initial approvals next year. In an equity research note to clients, S&P Capital IQ equity analyst Steven Silver viewed, "We see GS-7977 being combined with GILD's internal candidate GS-5885 in the more challenging genotype 1, including those patients who failed on previous treatments, in 2013. If successful, we expect the regimen to be filed for regulatory approval in 2014, and launched in 2015."
The first company to get approval for the next generation drug for treating Hepatitis C will have a major first mover advantage in the market. This is because physicians are progressively deferring to treat patients with available, approved drugs.
This was quite evident when Vertex Pharmaceutical's (Nasdaq: VRTX) Incivek witnessed 8.1 percent downside in U.S. sales during the second quarter. The drop in sales of Incivek is close to 30 percent when compared with the fourth quarter's $457 million in 2011. Interestingly, Vertex management blamed the demand downturn to more Hepatitis C patients being warehoused for future treatment with newer regimen such as GS-7977. The treatment period in the new drug candidate is shortened to 12 weeks versus 24 – 48 weeks standard time.
The price paid to acquire Pharmasset for GS – 7977 is seen as positive for Gilead as a result of the positive data the drug candidate has produced so far despite a lofty price tag. Significantly, Vertex too disclosed favourable early data from its licensed drug ALS-2200, which is likely to be a long-term challenger for GS-7977. "However, that program remains nascent and will face various combinations with other agents before it can determine its go-to-market regimen. We view it as likely that VRTX will need to partner ALS-2200 with an external agent, which would limit the economic benefit to the company than if it possessed the components internally, as GILD does with GS-7977 and GS-5885," analyst Steven Silver viewed the development.
The analyst also lifted his target price on Gilead to $69 based on forward P/E, citing Gilead's prospects in Hepatitis C market on the back of competitive news flow. S&P Capital IQ also believes that GS-7977 remains best positioned among the next generation drug candidates in trial stages as the most advanced and having the clearest safety profile. The stock closed Tuesday's normal trading at $57.55.