How CDC's hep.-C testing advice benefits drugmakers now

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The CDC's proposal that all US baby boomers get a one-time test for the hepatitis C virus has already given a boost to drugmakers in the antiviral space. If the agency finalizes the draft guidance later this year, potentially impacting screening rates, current and future players stand to gain even more.

One in 30 baby boomers, the generation born from 1945 through 1965, has been infected with HCV, and most don't know it, the CDC said. Progression can lead to major health problems, including liver cancer and the need for a transplant.

Pharma companies trying to hammer this point home through disease-awareness efforts just got a jolt from the CDC proposal, and surrounding media coverage. For instance, Vertex launched a campaign May 14, called I.D. Hep C, in association with the American Gastroenterological Association (AGA), aiming to educate people, especially baby boomers.

Findings from a national online survey of baby boomers conducted by Harris Interactive as part of the campaign revealed not only a lack of knowledge about hepatitis C, but a mistaken belief that testing for the virus is included in a basic annual check-up. It's not, and the survey suggests a conversation gap.

“Many people think they've been tested but haven't because it's not routinely included,” said Erin Emlock, a spokesperson for Vertex. “So it's great to have the CDC [draft] guideline, because it points out the need to specifically ask your healthcare provider to have the test.”

In terms of revenue, Vertex is one of several firms that stand to gain from wider testing. Merck and Vertex both launched new protease inhibitors (Victrelis and Incivek, respectively) last year that roughly double the chances of curing the hep. C virus and, in Incivek's case, halve treatment time. Both are indicated for prescription in combination with pegylated interferons and ribavirin brands, sold by Merck, maker of PegIntron and Rebetol, and Roche, which makes Copegus and Pegasys.

The availability of these “increasingly effective treatments,” said the CDC, was one factor behind its push to broaden testing. Other companies, like Gilead and Bristol-Myers Squibb, have antivirals in development that could improve efficacy even further.

Just how profitable the CDC's screening drive could be for drugmakers in the future depends on what ISI Group analyst Mark Schoenebaum calls the rate of “diagnosis penetration.”  Schoenebaum currently models a 27% diagnosis rate in the US—an indication that there's quite a bit of room for growth in screening rates.

If Gilead, which is bringing an HCV drug through Phase III testing (GS-7977), were to secure FDA approval, at current diagnosis rates the drugmaker could expect about $22 billion in total HCV revenue, or $1.3 billion in annual revenue amortized over 17 years, noted Schoenebaum, who covers the stock. “Each 10% increase in diagnosis in the US corresponds to ~$2.9 B in total HCV revenue (or $170 M in annual revenue), which increases our GILD DCF by ~$1,” he wrote.

One-time testing could identify more than 800,000 additional people with the virus, the CDC said. “Assuming $50,000 per patient, this could translate into $40 billion in total additional revenue opportunities in the U.S. if all [800,000] identified HCV+ patients are treated,” wrote Leerink Swann analyst Howard Liang in a note to investors.

If initiatives such as the CDC's, and an earlier action plan from the US Department of Health and Human Services' (HHS) for combating the hep. C epidemic, help expand screening for HCV, it seems reasonable to expect higher drug sales. Pharma shouldn't take the CDC proposal to the bank just yet, though. There are approximately 77.3 million baby boomers, according to Census Bureau statistics, and getting them all tested isn't a slam dunk.

The draft guidance “is positive news for the HCV market,” wrote Schoenebaum Monday, but “additional evidence will be needed that this recommendation will be broadly implemented (note that the impact of the CDC's recommendation in 2003 for universal HIV screening on diagnosis rates is unclear).”

The draft CDC guidelines are available for public comment until June 8.

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