Seeking Alpha
Long/short equity
Profile| Send Message|
( followers)  

By Shilpa Siddhi, M.S., M.B.A.

This article is Part 2 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 Roche, Abbott, Medivir, and Vertex Pharmaceuticals. Part 1 of the series can be found here.

Roche: Roche is yet another company competing in the race to bring an all- ral HCV therapeutic regimen to the market. Roche had Pegasys (peginterferon alfa-2a), a leading interferon in the market for the treatment of Hepatitis B and C patients since 2001. Pegasys has been used in ~1.5 million patients worldwide, and the sales of Pegasys were $961 MM for the first half 2012. If an all-oral treatment regimen for HCV is approved, Pegasys sales will decrease drastically. So Roche is actively conducting research to obtain an all-oral HCV combination therapy.

Roche acquired Anadys in late 2011 for $230 million to get access to the company's clinical candidate setrobuvir, and acquired danoprevir (DNV) from Intermune. Roche is developing setrobuvir (RG77790) which is a non-nucleoside NS5b inhibitor; danoprevir (RG7277), which is a HCV NS3/4A protease; and mericitabine (RG7128), which is the most advanced nucleoside analogue inhibitor of the RNA-dependent RNA polymerase (RdRp). Mericitabine was licensed from Pharmasset, now part of Gilead. All the three lead candidates are being evaluated in different Phase II clinical studies which are detailed below in table 1.

Table 1: Roche HCV Phase II Trial Details and Results


(Click to enlarge)

Source: LifeSci Advisors

Roche presented the study results from the ongoing MATTERHORN Phase II study at AASLD 2012. The trial is evaluating ritonavir boosted danoprevir (DNVr) in combination with mericitabine (MCB) and ribavirin (RBV) plus or minus PEG treated for 24 weeks. Overall Quad regimen (DVRr +MCB+ P/R) obtained SVR12 rates of 84- 86% and SVR4 of up to 100% in GT1 patients. MCB containing quad therapy was well tolerated, improved SVR rates and reduced relapse rates in GT1a patients, and thus looks like a promising approach for the treatment of partial or null responders.

Roche and Merck (NYSE:MRK) initiated the DYNAMO Phase II study in late 2011 evaluating the combination of Roche's mericitabine, Merck's Victrelis, Pegasys and Copegus in patients who have not responded to prior therapies. Roche has also conducted a small study of a combination of its NS3/4A serine protease inhibitor danoprevir with Norvir in null responders and the study showed strong efficacy in genotype 1b patients, but not much efficacy in type 1a patients.

Fundamentals: Roche ended the second quarter 2012 with cash, cash equivalents and market securities of approximately $5.44 BB (9.2 B CHF). With 862.57 MM shares outstanding and a stock price of $48.17 (10/31/12), the market cap stands at $41.5 BB, with outstanding debt of $18.4 BB (17.33 B CHF), the enterprise value (EV) will be $50.18 BB. (NOTE: CHF is converted to USD, 1CHF= 1.0646USD)

Roche's HCV candidates also look promising from the Phase II studies, although none have advanced to Phase III studies yet. Pegasys loses patent protection in 2017, when the new oral hepatitis therapies from Gilead, BMS, and Abbott might be approved and may have become standard of care. Roche has been active in developing new oral therapeutic combinations of its own portfolio and aims to secure a fair share of the market to substitute lost revenue from Pegasys sales. For now, Roche is playing catch-up, and expectations are lower than for other competitors in this space. This leaves greater upside potential for Roche if its treatments are equally or more effective than currently leading programs.

Abbott : Abbott is actively pursuing all-oral treatment for Hepatitis C treatment and has four compounds with three different mechanisms of action in multiple Phase II clinical trials. The company has non-nucleoside polymerase inhibitors (ABT-333 and ABT-072) and an NS5A inhibitor (ABT-267) in its pipeline. Abbott has established partnership with Enanta Pharmaceuticals for protease inhibitor ABT-450 and ABT-450 containing regimens. Abbot has recently shown encouraging results from its Aviator Phase II study and based on this regimen has started a Turquoise II Phase III study evaluating ABT-450 in GT1 patients. A summary of the Phase II clinical program and available results are shown in Table 2.

Table 2: Abbott HCV Phase II Trial Details and Results


(Click to enlarge)

Source: LifeSci Advisors

All of the Phase II studies of Abbott's HCV lead candidate ABT-450 look very promising with the higher SVR rates, shorter duration of treatment, interferon-free regimen, and controlled adverse events. Particularly results from the Aviator study have set a high bar for the rest of the HCV companies. Based on the promising SVR12 results from Aviator study, in October 2012, Abbott has posted a Phase III hepatitis C study (Turquoise-II) to evaluate the safety and efficacy of ABT-450, ritonavir, and ABT-267 (ABT-450/r/ABT-267) as well as ABT-333 co-administered with RBV in adults with Genotype 1 HCV infection and cirrhosis. The Turquoise Phase III study hasn't started enrolling patients.

Fundamentals: Abbott ended the second quarter 2012 with cash, cash equivalents of approximately $7.05 BB. With 1.57 BB shares outstanding and a stock price of $69.23 (10/12/12), the market cap stands at $108.64 BB, and with outstanding debt of $13 BB, the enterprise value is $114.6 BB.

After reporting very encouraging Phase II results from the AVIATOR study, and beginning a pivotal Phase III study, Abbott is emerging to be a strong competitor to Gilead. Abbott plans to launch an all-oral HCV treatment regimen in 2015, which might be trailing next to Gilead. Abbott's quad regimen from the AVIATOR study has obtained very high SVR rates in hard to treat HCV patients. It will be interesting to see if the multi-pill regimen will pose any unforeseen consequences of toxicity or drug-drug interactions. Abbott's HCV combinations have shown strong clinical activity to date; however, they have not received as much attention as Gilead. With most investors expecting Gilead to be the HCV market leader, we believe that the potential of Abbott's programs are being overlooked. Abbott has the potential to be on the market soon after Gilead, and will likely gain significant market share.

Medivir (OTC:MVRBF): Medivir is another company active in hepatitis C research and has a lead compound simeprevir (TMC435), which is a NS3/4A protease inhibitor. Simeprevir is partnered with Tibotec Pharmaceuticals, one of Janssen Pharmaceutical companies, and is being jointly developed by both the companies. Medivir also has TMC-649128 in collaboration with J&J in its HCV pipeline.

Simeprevir has been tested in PILLAR and ASPIRE Phase II trials. It is also currently being tested in three Phase II interferon free trials with or without Ribavirin. They are: 1) simeprevir with sofosbuvir/GS-7977 (Gilead) in null responder genotype 1 HSV patients, 2) simeprevir with daclatasvir/BMS-790052 (NYSE:BMS) in treatment naïve or null responder genotype 1 HCV patients, and 3) simeprevir in combination with TMC-647055 (Janssen) and ritonavir. Recently J&J entered into a collaboration with Vertex Pharmaceuticals to evaluate simeprevir with VX-135 in another Phase II study. Some of the Phase II clinical programs and available results are shown in Table 7.

Table 7: Medivir HCV Phase II Trial Details and Results


(Click to enlarge)

Source: LifeSci Advisors

In AASLD 2012, post hoc analyses of PILLAR and ASPIRE studies evaluating patients receiving 150mg of simeprevir with a Metavir score of F3 and F4 were presented. In the PILLAR study, SVR24 was achieved in 79% of the treatment naive patients with a Metavir score of F3. In the ASPIRE study, SVR24 was achieved in 48% and 62% of the treatment-experienced patients with a Metavir scores of F3 and F4. HCV patients with Metavir scores of F3 and F4 are harder to cure since they have advanced fibrosis. Encouraging results from the post hoc analyses suggest that simeprevir could potentially be a new treatment option for people with advanced hepatitis C.

Four Phase III trials are in progress evaluating simeprevir. QUEST-1 and QUEST-2 in treatment naïve patients, and PROMISE in patients who have relapsed after prior peginterferon/RBV treatment, are expected to be completed in Q1 2013. Results from the ATTAIN Phase III trial are expected to be available in Q1 2014.

Table 8: Phase III Clinical Trials of Medivir/ J&J Lead Candidate simeprevir (TMC435)


(Click to enlarge)

Source: LifeSci Advisors

Fundamentals: Medivir has ended the second quarter 2012 with cash, cash equivalents of approximately $60.9 MM . With 31.6 MM shares outstanding and a stock price of $8.80, the market cap stands at $275.1 MM, and the enterprise value is $214.5 MM.

To date, simeprevir has been tested in about 1750 HCV patients and the toxicity profile has been acceptable. Although simeprevir has near-term Phase III catalysts, all the studies are in combination with interferon and RBV and none of them are all-oral treatments. Interferon free regimens evaluating simeprevir are still being tested in Phase II studies. If any of the Phase II studies evaluating simeprevir with sofosbuvir or daclatasvir or VX-135 gives consistent SVR rates with a good safety profile, it will be interesting to see the new developments in the HCV space. At this time, we believe that the markets have taken into account the risks and potential rewards of Medivir's entrance into the HCV market and that the stock is fairly valued.

Vertex Pharmaceuticals: Vertex is already actively present in the hepatitis C market with the approval of Incivek (telaprevir) in 2011, developed in partnership with J&J. This drug was approved to be given in combination with peg-interferon alfa and ribavirin to treat HCV patients who were either not been previously or who failed such treatment. Like other players in the HCV space, Vertex is pursuing an all-oral regimen that does not include interferon. The company is in the early stages of pipeline for the development of oral HCV treatments compared to its competitors. The two candidates in the HCV pipeline are VX-222 (non-nucleoside NS5B inhibitor) and ALS-22000 (VX-135, nucleotide NS5B inhibitor). The company had net product revenues of approximately $254 MM from Incivek for the Q3 2012. The company is expecting the full year Incivek revenues to be between $1.1 BB - $1.25 BB.

On November 1, 2012, Vertex entered into two separate collaborations with GlaxoSmithkline (NYSE:GSK) and Johnson & Johnson to evaluate the company's VX-135 (polymerase inhibitor) hepatitis C candidate in two Phase II proof-of-concept studies. One study will test VX-135 in combination with the NS5A inhibitor GSK2336805 and another study will look at the combination with simeprevir (TMC435). The Phase II studies are planned to be initiated in early 2013, pending discussions with regulatory authorities. The Phase II studies will evaluate safety, tolerability and viral cure rates after 12 weeks of combination therapy and the companies will jointly fund costs associated with the respective studies

Data from a seven-day viral kinetic study of VX-135 given once daily in GT1 patients was presented at AASLD 2012. VX-135 (200 mg) given once daily for 7 days or in combination with RBV (n=8) showed a median reduction in HCV RNA with clear dose dependence. VX-135 was well tolerated with no serious adverse events. The company is further evaluating VX-135 in 2 separate Phase II studies with GSK2336805 and simeprevir (TMC435) and expects to have data by the end of 2013.

At AASLD 2012, Vertex presented new data from the Phase III study evaluating twice-daily or three times daily telaprevir in combination with PegIFN and RBV. The SVR12 rates in the patients who received the telaprevir twice-daily was 74% (274/ 369) compared to 73% (270/371) in patients who received telaprevir three times daily. Vertex plans to submit the data from the new regimen to the FDA in 2013 for potential inclusion in the telaprevir label.

Fundamentals: Vertex ended the third quarter 2012 with cash, cash equivalents and marketable securities of $1.3 BB. With 216 MM shares outstanding and a stock price of $41.43, the market cap is $9.0 BB, and the enterprise value is $8.26 BB.

Vertex is fairly early in its all-oral HCV pipeline compared to other companies. Vertex has positioned itself well by entering into clinical collaborations for Hepatitis C with GSK and J&J. An important factor to consider with Vertex is that they are already treating HCV patients with Incivek. This will give them an advantage with physicians, hospitals, and payers if and when their oral regimens are approved. Moreover, Vertex stock has been discounted based on the progress of Gilead and others in advancing their HCV treatments. If any of the leading programs stumble, Vertex will be the direct beneficiary. This is true first in terms of catching up in the all-oral market, but also Incivek sales should continue to grow until more safe and effective all-oral therapies are approved. With the combination of a promising all-oral program and a marketed HCV drug, Vertex has plenty of room to grow in the HCV space.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: New Second Generation Combination Therapy For HCV - First Or Best In The Market - Part 2