By Shilpa Siddhi, M.S., M.B.A.
This article is Part 1 in a series about Hepatitis C intended to provide an update and fundamental analysis of the companies that are actively pursuing the development of an all oral therapy for HCV. The series will cover the major players in the HCV space, including Gilead (NASDAQ:GILD), Bristol-Myers Squibb (NYSE:BMY), Roche (OTCQX:RHHBY), Abbott (NYSE:ABT), Achillion (NASDAQ:ACHN), J&J (NYSE:JNJ), Vertex (NASDAQ:VRTX), Idenix (NASDAQ:IDIX). Here we discuss Gilead and Bristol-Myers Squibb.
Hepatitis C Virus (HCV) is the most common type of viral hepatitis, which causes inflammation of the liver. It is estimated that currently over 3.2 million people in US and 170 million people worldwide are infected with HCV. The HCV infection with genotype 1 (GT1) virus is the most common, accounting to almost two thirds of all the HCV infections in U.S. and Europe. With a global prevalence of 3%, Hepatitis C (HCV) represents a multi- billion dollar market opportunity. The current standard of care is interferon and ribavirin (IFN+RBV) therapy; however the recently approved protease inhibitors Victrelis (boceprevir) and Incivek (telaprevir) have begun to change the landscape. While these new treatments have improved rates of sustained virologic response (SVR), currently available therapies have long treatment duration, significant adverse side effects, high dropout rates, and do not address the entire hepatitis C market.
Drug developers are focused on inhibition of viral proteins essential for the HCV replication cycle. The NS5B polymerase is essential for viral replication and is involved in creating copies of the viral RNA genome. The NS3 protease is a key component in viral replication and prevents protein processing necessary for completion of viral life cycle. These are the two most common drug targets. Some companies are also focusing on inhibitors of NS5A, which is part of the HCV replication complex or replicase. These targets and the companies pursuing drug development candidates are summarized in Table 1. In terms of efficacy, the goal is to obtain a sustained virologic response at 24 weeks (SVR24), which means that no virus is detected 24 weeks after stopping treatment. An SVR24 indicates that the hepatitis C infection has been eradicated, which can result in decreased cirrhosis and complications of liver disease, decreased rates of liver cancer and decreased mortality.
Table1: Classes of HCV Drugs and Company Positioning
Source: LifeSci Advisors
Gilead Sciences - Gilead has seven candidates in the pipeline for the treatment of HCV infection. Gilead acquired Pharmasset in 2011 for $11 billion to gain the company's lead HCV candidate PS-7977, now called sofosbuvir or GS-7977, which is a nucleotide NS5B inhibitor. Gilead's lead candidate GS-7977 is being studied extensively in Phase II and III studies in genotype 1, 2, and 3 infected patients in combination with ribavirin, with or without pegylated interferon. The company expects to file a new drug application (NDA) for the treatment of genotype 2 and 3 patients in 2013. The Phase II results that have been made public to date are summarized in Table 2, and Phase III data is discussed below.
Table 2: Gilead's HCV Phase II Trial Details and Results
Source: LifeSci Advisors
Bristol-Myers Squibb is also testing sofosbuvir plus their NS5A inhibitor daclatasvir (formerly BMS-790052). BMS had a clinical collaboration with Pharmasset and started this Phase II trial before Gilead's acquisition. This study showed high hepatitis C cure rates of >90% for genotype 2/3 and 100% for genotype 1 patients. These patients had previously failed to respond to interferon, and therefore represent a tough treatment group. The details of the study are discussed in the BMS section. This is a promising combination. It appears, though, that these two competing companies, notably Gilead, are not interested in conducting a Phase III study to evaluate this combination.
Sofosbuvir is being evaluated in four Phase III clinical studies, all of which are fully enrolled. Results from the POSITRON Phase III study evaluating 12 weeks of sofosbuvir plus ribavirin in genotype 2, 3 patients who are interferon ineligible/intolerant is expected to be available as early as December 2012. The results from other studies are expected to follow in early 2013. Gilead is expecting to file the NDA for sofosbuvir in the second quarter of 2013.
Table 3: Summary of Phase III Clinical Trials of sofosbuvir (GS-7977)
Source: LifeSci Advisors
Sofosbuvir has the potential to be the next HCV product to reach market, but the ultimate winning combination remains to be seen.
Gilead is advancing multiple oral antiviral compounds with different combinations of mechanisms. A single tablet regimen of sofosbuvir + GS-5885 for genotype1 patients has been advanced to Phase III clinical studies, and the first patient was dosed in October 2012. GS-5885 is an oral NS5A inhibitor, and GS-9256 is a NS3 protease inhibitor. Both GS-5885 and GS-9256 are being evaluated in Phase II trials. Encouraging Phase II clinical trial results with SVR4 of 100% with sofosbuvir plus GS-5885 were presented at the American Association for the Study of Liver Diseases (AASLD) 2012 Conference. GS-9620 is an oral TLR-7 agonist and GS-9669 is a non-nucleoside polymerase inhibitor. Both are in Phase 1 clinical trials. Other pipeline programs include GS-9451, an oral NS3 protease inhibitor and tegobuvir or GS-9190, an oral NS5B non-nucleoside polymerase inhibitor.
Fundamentals: Gilead Sciences ended the third quarter 2012 with cash, cash equivalents and marketable securities of approximately $2.65BB. With 792MM shares outstanding, debt of $9.2B, and a stock price of $72.29, the market cap is $54.8B and the enterprise value (EV) is $61.3B.
Gilead's sofosbuvir has become the front runner among all the HCV candidates currently being tested. With the recent clinical hold of BMS, Idenix, and Biocryst's lead candidates, Gilead's candidate has all the eyes on it. Sofosbuvir has been tested in thousands of patients in multiple clinical trials with few concerns for adverse events. At AASLD 2012 Gilead presented encouraging data from its ongoing sofosbuvir plus GS-5885 Phase II studies with SVR4 of 100% in GT1 HCV patients. After seeing very high SVR rates from Abbott's Phase II trial, investors were eager to see some good update from Gilead's HCV pipeline. The company was awarded accordingly, as their stock hit an all-time high and continues to trade near that point.
Despite their increased valuation, in the next three to six months Gilead Sciences will likely see a positive movement in the stock. This depends on a positive readout of the sofosbuvir Phase II trials, with data that meets or exceeds expectations on efficacy and safety). Abbott's recent strong Phase II results set a high bar for Gilead, but Gilead remains the front-runner in this race. The company's sofosbuvir is very likely to be the first oral combination HCV therapy in the market, and if that happens there is plenty of room for shareholders entering now to be rewarded.
Bristol Myers Squibb - Bristol Myers Squibb (BMY) is also evaluating multiple HCV drug candidates. The BMS acquisition Zymogenetics in 2010 for $885 million brought pegylated interferon lambda. The company acquired INX-189 (now called as BMS-986094) through the acquisition of Inhibitex in 2012 for $2.5 billion. In August 2012, BMS announced the discontinuation of the development of BMS-986094 after the FDA had placed the drug on clinical hold following reports of heart and kidney toxicities. In the feverish time surrounding the HCV space in late 2011, the Inhibitex acquisition was probably a reaction to Gilead's acquisition of Pharmasset.
BMS is testing its NS5A inhibitor daclatasvir (DCV, BMS-790052), the NS3-protease inhibitor asunaprevir (ASV), and BMS-791325, a non-nucleoside NS5B inhibitor, in a series of Phase II studies. Daclatasvir is company's lead candidate and is also being evaluated in multiple Phase III combination trials and has shown great promise. BMS had separate clinical collaborations with Pharmasset (now owned by Gilead) for evaluating GS-7977 and with Tibotec & Medivir for evaluating the NS3/4A protease inhibitor simeprevir (TMC435). In parallel with Phase II studies evaluating daclatasvir and asunaprevir, the company is also conducting Phase II studies with different combination therapies. A summary of the Phase II clinical program and available results is shown in Table 4.
Table 4: Bristol Myers Squibb HCV Phase II Trial Details and Results
Source: LifeSci Advisors
In the ongoing Phase IIb COMMAND-1 (AI444-010) study, BMS is evaluating daclatasvir in combination with peginterferon alfa-2a and ribavirin in 4 GT1 patients. DCV + PegIFN + RBV patients achieved higher SVR12 rates compared to placebo-treated patients. The COMMAND (AI444-031) study is evaluating short term treatment for 12 or 16 weeks of DCV, PegIFN/RBV, where early viral suppression has been seen.
Results from AASLD 2012 from a Phase 2a study evaluating daclatasvir and asunaprevir in dual, triple (DCV + ASV + RBV) and quadruple (DCV + ASV + PegINF + RBV) combinations therapies. The quad regimen demonstrated greater than 95% (39/41) SVR12, and some of the dual and triple regimen patients required intervention with PegINF. The quad regimen was highly effective for difficult to cure chronic HCV GT1a- and 1b-infected null responders, where a high proportion of viral breakthrough was seen upon withholding PEG. The dual regimen (DCV+ ASV) demonstrated SVR4 in GT1b patients, suggesting that IFN-free treatment regimen for GT1 patients might need to be tailored according to the sub genotype.
Also updated at AASLD, BMS is evaluating 12 and 24-week interferon- and ribavirin-free treatment regimens of daclatasvir, asunaprevir, and BMS-791325, a non-nucleoside NS5B polymerase inhibitor, in GT1 patients. Data from the 12-week treatment arm yielded a SVR4 rate of 94%.
Multiple Phase III studies are being done with Bristol-Myers' lead compound, daclatasvir in different combination therapies, with the results expected in late 2013 or early 2014. These studies are detailed in Table 5.
Table 5: Phase III Clinical Trials of BMS Lead Candidate daclastavir (BMS-790052)
Source: LifeSci Advisors
Fundamentals: Bristol-Myers Squibb ended the third quarter 2012 with cash, cash equivalents and marketable securities of approximately $1.5B. With 1.65B shares outstanding and a stock price of $31.48, the market cap stands at $51.9B. With $751MM of debt, the EV is $53.3B. BMS had issued $2B in senior notes to fund the acquisition of Amylin, which were repaid during the third quarter.
Despite lagging behind Gilead in the race to an all-oral HCV treatment, BMS is a strong competitor and has a good chance of reaching the market with a safe, efficacious treatment regime for the disease. BMS would likely prefer to explore a combination treatment with Gilead that would vault it forward, but Gilead appears uninterested in such a pact. BMS shares have been affected by Gilead's continuing success in HCV and by the botched acquisition of Inhibitex, creating an opportunity to join in its future success in HCV. While Gilead is currently in the lead, it is a long race with much left to be determined. Most importantly, the HCV treatment is expected to be worth up to $20B per year by 2020, meaning there is plenty of space for multiple competitors if their treatments are safe and effective. We expect BMS to keep pace in development of HCV therapies and eventually share in a very lucrative market.