Setback, not disaster, for Gilead hep. C regimen, analysts say

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In the race to develop an all-oral hepatitis C therapy, Gilead Sciences just saw its lead shrink. Gilead's announcement of a high relapse rate for its experimental GS-7977 + ribavirin combo not only dampened enthusiasm for the pipeline asset. A potential delay in approval may open the door for competitors.

In a surprising development, the company said that six out of six patients with HCV genotype 1, all of whom were prior “null” responders to an interferon-containing regimen, experienced viral relapse within four weeks of completing the all-oral treatment. The news Friday sent Gilead's stock tumbling.

Conjecturing as to the reasons behind the high relapse rates, seen in a study called Electron, Gilead said additional direct acting antivirals (DAAs) may be necessary to treat these null responders.

GS-7977 belongs to a drug class called oral nucleotide polymerase inhibitors, also known as “Nucs.” In November, Gilead agreed to pay almost $11 billion for the biotech firm developing GS-7977, which was the furthest along of the Nucs having just entered Phase III testing. At the time, some analysts were saying GS-7977 could become the preferred option for care if it works without the injectable drug interferon, which has flu-like side effects.

Friday's disappointing report may have prompted a rethink on GS-7977, but analysts maintain that a Nuc will prove to be a key component of an all-oral hepatitis C regimen.

In an investor note titled “‘Nuc Supremacy' under fire,” Barclays analyst Tony Butler lowered his GS-7977 forecast to $3.8 billion in peak sales, from a previous peak revenue estimate of $5.3 billion. That assumes a 30% share of the total oral market. “We think GILD is more likely to become one of several players in the HCV space, as opposed to the majority leader assumed by consensus,” Butler wrote to investors on Tuesday.

Yet to come are results of GS-7977 among genotype 1 treatment-naïve patients, and the cure rate here is likely to be better.

“Data seem to support Gilead's speculation that nulls could be harder to treat with a [non-interferon] regimen because they are less responsive to their endogenous [innate] INF,” analyst Mark Schoenebaum of ISI Group explained in a conference call Tuesday. He added, “We think [sustained viral response] will be higher in naïves vs. nulls, but it's much harder to establish how much higher.”

Schoenebaum said release of data among naïves, expected in late March to mid April, is “the key event for [Gilead's] stock in the short term.

Among those sure to have noticed the setback with GS-7977 are Bristol-Myers Squibb, which in January said it was buying Inhibitex for about $2.5 billion and getting access to that firm's potential HCV Nuc INX-189 (to go with NS5A inhibitor daclatasvir), and Abbott, which has a Phase IIB study of its protease inhibitor ABT-450 + non-nucleoside polymerase inhibitor ABT-333 + ribavirin.

“This setback has narrowed the competitive window,” Butler continued, “and we believe some ~11% of the US HCV market may be up for grabs, as we reduced our estimates for GS-7977.”

Given the 100% (6/6) relapse rate so far in null responders, 12 weeks of GS-7977/ribavirin may not be optimal for naïves as well. “If 24 weeks of treatment and/or another [DAA] are needed, the market entry of a GS-7977-based regimen could be delayed one to two years,” Butler noted.

Such a delay would bode well for the two approved protease inhibitors, Vertex's Incivek and Merck's Victrelis. Butler forecasted another $500 million in Incivek revenue per year in 2014 and 2015, as well as the ability for Vertex to catch up with its own Nucs, dubbed ALS-2200 and ALS-2158.

Biotech firm Idenix is also developing a Nuc, IDX184, which can be combined with its NS5A inhibitor IDX719.

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