The Valeant (VRX) and Citron saga is not all the drama happening in biotech these days.
On October 22, federal health officials warned doctors and patients that two of AbbVie’s (ABBV) hepatitis C treatments can cause life-threatening liver injury in advanced stage patients. The Food and Drug Administration announced October 22 that it will require AbbVie to add new warnings to its Viekira Pak (1) and Technivie (2) drugs after deaths and liver transplants have been reported in patients who already had liver damage caused by the disease. During the second quarter, global sales of Viekira were $385 million, on pace for blockbuster status. Viekira is one of AbbVie’s top drugs, trailing only Humira in sales during the six months ended June 30.
Though the news will hurt perception of AbbVie’s hepatitis C portfolio, if it hasn’t already, the possibility of other warnings on other drugs in the ultra-competitive market of hepatitis C cures remains unclear at this time. A look at AbbVie’s second-quarter results, for example, shows a robust interaction with the FDA regarding Viekira, which at the time was approved in 47 countries with additional approvals anticipated. The company even noted “that the FDA had granted Viekira orphan drug designation for the investigational treatment of HCV infection in pediatric patients, 0-16 years of age.” That this warning hit the wires in light of Viekira’s increasing traction across the globe is rather surprising, to say the least.
Could something like this happen to Gilead’s (GILD) hepatitis C portfolio? We cannot be certain that it can’t, and the possibility, while remote, has increased. For one, there were a total of 20 deaths in Gilead’s Harvoni/Sovaldi trials for advanced liver disease, Phase II results released in April, and while none of the deaths assessed by the investigator were related to the study treatment, in light of the additional warnings slapped on AbbVie’s hepatitis C drugs, we can’t be sure new information hasn’t come to light. Solvadi/Harvoni interactions with other drugs (e.g. amiodarone) have proven fatal, and there may be others that the public simply doesn’t know about at this time.
That said, we’re not about fear-mongering, but we think it’s important to lay out all the risks. Unlike AbbVie, which is a highly diversified drug provider (Humira accounts for a big portion of sales, however), hepatitis C drugs Sovaldi and Harvoni make up a major portion of Gilead’s revenue, and an adverse event impacting its hepatitis C portfolio would be a huge deal, far bigger than the news impacting AbbVie. With the risks duly noted, Gilead remains a holding in the portfolio of the Best Ideas Newsletter, and we maintain our view that Gilead’s offerings appear to be the most efficacious and convenient hepatitis C cures on the market today (please read this note from late 2014 for more background on Solvadi/Harvoni and the hepatitis C opportunity):
From the December 25, 2014 note:
The efficacy of Gilead’s Solvaldi has been well-established in patients with HCV genotypes 1, 2, 3, or 4 infections, and cure rates are as high as 90%; therapy has been reduced to 8-12 weeks from 24-48 weeks. Solvadi and its successor Harvoni are excellent examples of what we would describe as interferon-free, all-oral regimens that achieve extremely high cure rates with fewer side effects. Previous HCV treatments, for example, caused side effects that ranged from bone marrow suppression and fatigue to debilitating rash and anemia. Harvoni’s efficacy, by combining the NS5A inhibitor ledipasvir with the nucleotide analog polymerase inhibitor sofosbuvir (Solvadi), is so impressive that it can achieve cure rates in the range of 94%-99%. This efficacy will be difficult for any competing therapy to better.
There are a number of therapies that compete with Sovaldi and Harvoni. Johnson & Johnson (JNJ) Janssen’s Olysio (simeprevir), Merck’s (MRK) Victrelis, and Vertex’s (VRTX) Incivek (telaprevir) are a few antivirals that come immediately to mind, though the latter two aren’t specifically indicated as such. AbbVie’s Viekira Pak was recently approved by the FDA. “Viekira Pak contains three new drugs—ombitasvir, Enanta’s (ENTA) paritaprevir and dasabuvir—that work together to inhibit the growth of HCV…Viekira Pak is the fourth drug product approved by the FDA in the past year to treat chronic HCV infection. The FDA approved Olysio (simeprevir) in November 2013, Sovaldi (sofosbuvir) in December 2013 and Harvoni (ledipasvir and sofosbuvir) in October 2014 (source: FDA).” Further, Achillion Pharmaceuticals (ACHN) believes its HCV regimen has “best in-disease” performance, though results so far have extended only to a Phase 2 “Proxy Study” and use sofosbuvir for treatment.
The HCV-landscape continues to evolve, and there is plenty of room for a number of players in this space, including the big 3: Johnson & Johnson, Gilead, and now AbbVie. At the moment, we believe that Gilead’s Harvoni is the most efficacious, as Viekira Pak trials showed a bigger and lower bottom-rung of cure rates (91%-100%), compared to Gilead’s Harvoni registering a much tighter range of 94%-99%. Those using the Viekira Pak reported side effects of feeling tired, itching, feeling weak or lack of energy, nausea and trouble sleeping; the most common side effects of Harvoni include tiredness and headache. The Viekira Pak is four-to-six pills per day, while Harvoni is only a single pill taken daily, so convenience also appears to edge in Gilead’s favor.
We have been expecting a competing product from Merck, grazoprevir/elbasvir (3), in the hepatitis C market, set to be approved in early 2016, but we think the “late” warning on AbbVie’s Viekira is in some ways a black eye for the FDA. We don’t think the federal agency will be rushing Merck’s product to market, and Gilead’s first-mover advantage appears to be even more formidable in light of AbbVie’s misstep. We view Merck’s grazoprevir/elbasvir as a “me too” drug similar to AbbVie’s Viekira, and we doubt that the drug will gain significant traction in light of the stigma on “new” hepatitis C alternatives to Solvaldi/Harvoni.
Having said all of this, we expect Merck to gather some share of the market for hepatitis C cures over time, but its combo drug may just supplant AbbVie’s Viekira in the market, to a degree. From our perspective, Gilead will remain the 800-pound gorilla, and we doubt that will change anytime soon given the success it has had in 180,000+ patients in the US and EU thus far. The misstep by AbbVie is a minor negative to exclusive provider of Viekira, Express Scripts (ESRX) and a modest positive for CVS (CVS), which has an exclusive relationship with Gilead. We think the news also raises an ancillary concern of searching for lower-cost alternatives: they can be deadly. Sometimes paying a premium for a great drug is worth it.
(1) “Viekira Pak is a fixed-dose combination of dasabuvir, ombitasvir, paritaprevir, and ritonavir used with or without ribavirin, another hepatitis C medicine. Viekira Pak is FDA-approved for use in patients with genotype 1 chronic hepatitis C infection including those with compensated cirrhosis.” — Source: FDA
(2) “Technivie is a fixed-dose combination of ombitasvir, paritaprevir, and ritonavir, used in combination with ribavirin. It is FDA-approved for use in patients with genotype 4 chronic hepatitis C virus infection without cirrhosis.” — Source: FDA
(3) “Grazoprevir/elbasvir is Merck’s investigational, once-daily, single-tablet combination therapy consisting of grazoprevir (NS3/4A protease inhibitor) and elbasvir (NS5A replication complex inhibitor). As part of Merck’s broad clinical trials program, grazoprevir/elbasvir is being evaluated in multiple HCV genotypes including patients with difficult-to-treat conditions such as HIV/HCV co-infection, advanced chronic kidney disease, inherited blood disorders, liver cirrhosis and those on opiate substitution therapy.” — Source: Merck
Note: This article contains information related to the investment-decision making process in the shares of the companies mentioned. Please contact your doctor regarding health-related information of the drugs mentioned.