Analysts: Harvoni News Nothing But Upside For Gilead Sciences, Inc.

Published: Oct 13, 2014

Analysts: Harvoni News Nothing But Upside For Gilead

October 13, 2014

By Riley McDermid, Breaking News Sr. Editor

News that the U.S. Food and Drug Administration (FDA) has approved the first once-a-day pill for the treatment of hepatitis C, Harvoni, has nothing but upside for manufacturer Gilead Sciences, Inc. , and its investors, said two biotech analysts.

Gilead Science announced Friday that the pill, which is a cocktail of ledipasvir and sofosbuvir (known under the brand name Sovaldi), has been cleared for use in the main subtype of hepatitis, called genotype 1, which accounts for more than two-thirds of the nation’s cases.

The news was expected but still welcome for market watchers, said Bret Holley, a managing partner and biotech analyst with Guggenheim Securities.

“We believe Harvoni's U.S. label is favorable and contains no surprises as far as dosing recommendations or contraindications,” wrote Holley in a note to investors. “Importantly, the label includes guidance for a treatment duration as short as eight weeks for treatment-naive patients without cirrhosis and pre-treatment HCV RNA less than 6 million IU/mL, which GILD believes will be the dosing paradigm in nearly 50 percent of this patient group.”

GILD expects Harvoni will be available for sale in the United States as early as Monday, October 13. Gilead has had high hopes for Harvoni, after clinical trials found that over 90 percent of the patients treated with the drug had no detectable virus in their blood three months after treatment was ended. In medical parlance, that is effectively a cure.

“We continue to expect a very strong Harvoni U.S. launch in the fourth quarter of 2014, as we believe there has been substantial warehousing of patients ahead of the approval,” said Holley. “Although we believe near-term expectations are high for Harvoni sales, we see clear potential for GILD to exceed these expectations given the FDC's likely transformative impact on the U.S. HCV treatment paradigm.”

Guggenheim maintained its buy rating on the stock.

The high costs of both drugs, although controversial with insurers and public health officials, remain exciting for investors. A 12-week course of Harvoni costs around $94,500, while a similar course of Sovaldi will run as much s $84,000. “GILD has telegraphed Harvoni's price over the past weeks, and we believe this pricing will be viewed as unsurprising,” wrote Holley. “Notably, we believe the lower price for eight-week Harvoni dosing in a large number of U.S. HCV patients will be viewed favorably by payors.”

How many patients are likely to take the longer course of treatment remains debatable, and is of interest to investors, said Mark Schoenebaum, a biotech analyst for ISI Group.

Schoenebaum said that Gilead has anticipated that question, saying around 45 percent of patients could receive eight weeks of therapy.

“GILD has not yet disclosed how the company reaches the 45 percent figure. However, based on the label today, in ION-3 the percent of naïve GT1 patients with chronic HCV and HCV RNA <6M IU/ml (that could be eligible for eight weeks) was [around] 60 percent of patients,” he wrote in a note to investors.

“Academic studies that we've since found appear to support this figure as a reasonable estimate for the GT1 population in the U.S.,” said Schoenebaum. “If we combine that assumption with the idea that [around] 95 percent of patients of patients in the U.S. are naïve and that [about] 20 percent of HCV patients develop cirrhosis (80 percent do not), then we also reach an estimate of 45 percent of patients who could receive eight weeks of therapy.”

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