Gilead Sciences, inc. Stock's Incoming Game Changer

Gilead Sciences ' Sovaldi may have revolutionized hepatitis C treatment, but it also served as a lightning rod of controversy over drugmakers' pricing of next-generation medicines.

Sovaldi's ability to clear the virus in 90% of patients over 12 weeks marked a significant improvement over Incivek, an injectable medicine that for a brief time was the fastest drug to reach billion-dollar blockbuster sales status. However, excitement over Sovaldi was blunted when Gilead set a price of $84,000 for a 12-week treatment course, far outstripping Incivek's $50,000 cost.

With Gilead poised to win FDA approval for its next hepatitis C drug, a combination therapy made up of Sovaldi and a new drug, ledipasvir, a similar price controversy could be on tap. Reports suggest this new medicine, which will finally do away with side effect-laden ribavirin and peginterferon, may be priced even higher than Sovaldi. If that proves correct, sales of the new drug could add substantially more to Gilead's top line next year.

Source: Gilead Sciences.

Even better outcome

Before the approval of Incivek in 2011, a hepatitis C patient's chance for a cure rested on a coin flip. Just half of those treated with ribavirin and peginterferon, a treatment that cost about $20,000, achieved sustained viral response. That was far from ideal, particularly since treatment with those two drugs lasted 48 weeks and subjected patients to a host of unpleasant side effects.

And even after Invicek's approval, hepatitis C treatment remained troublesome. Incivek cured the disease in about 80% of patients, but the drug still had to be dosed alongside ribavirin and interferon; the treatment period got shorter, but still lasted24 weeks or more.

So it wasn't surprising that patients and doctors were thrilled at the promise of Gilead's Sovaldi, which cured90% of patients in just 12 weeks.

But even though Sovaldi eliminated the use of ribavirin and peginterferon in some patients, the vast majority -- those with genotype 1 hepatitis c, for example -- still needed to take them. However, that could be about to change.

Assuming the FDA gives the go-ahead, Gilead's Sovaldi and ledipasvir combination drug, which can cure as many as 99% of patients, will finally toss aside ribavirin and peginterferon from hepatitis C treatment regimens, while also shortening the treatment period to as little as eight weeks in some cases.

Source: Gilead Sciences.

Pricing a game changer

Sovaldi marked an impressive improvement over Incivek, but payers and policymakers recoiled at its $84,000 price. Although Gilead has endured the ire of payers and pharmacy benefit managers such as Express Scripts , it seems undaunted.

According to reports, Gilead's looming hepatitis C drug could cost more than Sovaldi. That's a staggering revelation for a drug that addresses a patient population in excess of 120 million people worldwide.

But before people panic, the price of Gilead's new drug may not be drastically different from what payers are already spending today. Treating patients with Sovaldi, ribavirin, and peginterferon can cost as much as $95,000 and Gilead has indicated that pricing for its new drug will be based on that cost.

If so, then the new pricing might even be less expensive than current treatment in some cases. For instance, in interferon-intolerant patients, some doctors have turned to prescribing Sovaldi alongside Johnson & Johnson' s Olysio, a move that increases the treatment cost to more than $150,000.

Room to run

Gilead estimates that it will treat 150,000 people for hepatitis C this year (70,000 had been treated with Sovaldi in the first six months), and that as many as 200,000 might be treated for the disease next year. If those estimates prove correct, Gilead could see its sales head higher. Of course, Gilead's new drug hasn't been approved (yet), pricing hasn't yet been officially announced, and competing drugs from Bristol-Myers Squibb , AbbVie , and Merck are on the way. That means there are are a lot of "what ifs" to consider. Nonetheless, Gilead remains in a great spot and should have lots of opportunity to keep marketing its hep c drugs given the market size, suggesting that as more patients are treated, the company's hepatitis C sales may climb, rather than fall, in 2015.

This coming blockbuster will make every biotech jealous

The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW .

The article Gilead Sciences, inc. Stock's Incoming Game Changer originally appeared on

Todd Campbell owns shares of Gilead Sciences. Todd owns E.B. Capital Markets, LLC. E. B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends Gilead Sciences and Johnson & Johnson. The Motley Fool owns shares of Gilead Sciences and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics