Gilead Sciences, Inc.
) recently announced disappointing results from a phase II trial
(ELECTRON) of its pipeline candidate GS-7977, sending its share
price down significantly. GS-7977, which was acquired as part of
Gilead's $11 billion acquisition of Pharmasset in January 2012, is
being evaluated in hepatitis C patients (HCV) infected with
genotype I virus in the ELECTRON study.
The study showed that the majority of genotype 1 HCV patients
who have not responded to earlier interferon-containing regimens
(null responder arm) experienced viral relapse within four weeks
post treatment with GS-7977 in combination with ribavirin (standard
of care) for 12 weeks.
Of the eight patients in the null responder arm, six relapsed
within four weeks of treatment with GS-7977 and ribavirin. Two
patients have completed only two weeks post-therapy and have not
experienced any relapse yet. Management indicated that GS-7977 may
need some other antiviral drugs to effectively treat certain HCV
patient populations, thus kindling doubts about the effectiveness
of the drug.
ELECTRON is a multi-armed trial evaluating GS-7977 in different
types of HCV patients, in different regimens. The study was also
evaluating genotype 1 treatment-naïve patients, data from which
will be available in the next six months.
Earlier this month, Gilead had announced data from the study
which showed that the combination of GS-7977 and ribavirin led to
rapid virological response (RVR; undetectable virus at 4 weeks of
therapy) in all evaluable (whether null responders or treatment
naïve) genotype 1 (GT1) HCV patients.
GS-7977 is undergoing two other phase III trials in patients
with HCV of genotype 2 and 3. Both studies are studying GS-7977 in
combination with ribavirin. The candidate is also being studied in
other phase II/III trials in combination with or without standard
of care in several types of HCV patients.
Moreover, Gilead believes GS-7977 has the potential to be
combined with Gilead's internal HCV pipeline candidates resulting
in multiple all-oral interferon-free single tablet regimens (
). Though the unfavorable ELECTRON data will be a setback for the
company, we believe GS-7977 still has significant potential to
successfully treat HCV.
The HCV market is indeed attractive characterized by a
significantly unmet need. A huge population suffers from HCV
infection across the world. However, the number of the treated is
much lower. This leaves the field open for new treatments.
We currently have a Neutral long-term recommendation on Gilead.
The stock carries a Zacks #4 Rank (short term Sell rating) in the
We like the company's strong HIV franchise and its deep and
diversified pipeline, particularly the potential blockbuster HIV
combination pill Quad (a combination of HIV pipeline candidates,
elvitegravir and cobicistat, and marketed HIV drug Truvada). We
believe the positive outcome of two late stage trials of Quad will
lead to its approval.
Despite the current clinical setback, we expect the acquisition
of Pharmasset to provide a significant HCV franchise which can help
mitigate the impact of the upcoming patent expirations. We are
nevertheless concerned about patent challenges against its key HIV
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