Seeking Alpha
Long/short equity, tech, large-cap, energy
Profile| Send Message|
( followers)  

Summary

  • Gilead Sciences did not agree to collaborate with Bristol-Myers Squibb during the clinical trial for Daklinza.
  • The drug is under review of the EC for being approved as a Medical Product for Human Use (CHMP).
  • Gilead Sciences has some plans of its own, while Bristol-Myers Squibb revels on the success of being approved in Europe.

Bristol-Myers Squibb (NYSE:BMY) recently received approval for Daklinza, a hepatitis C drug, in Europe by the European Commission (EC). The drug can be used to cure the disease in several different genotypes, and has shown cure rates of almost a 100% during clinical trials, especially if its use is combined with Sovaldi, a drug manufactured by Gilead Sciences.

Gilead Sciences did not agree to collaborate with Bristol-Myers Squibb during the clinical trial for Daklinza, and wants to continue using its blockbuster drug alone to cure the disease. However, since the combination of the drug leads to much quicker and more effective healing results, medical practitioners may be compelled to use both the drugs together. The move made by the company to tap into this market is considered to be a smart one, based on the fact that it is one of the areas for key growth.

The drug designed by Bristol-Myers Squibb could be used to tap into European markets, where more than 15 million are said to suffer from hepatitis C. Most of these patients are of the genotype 1, but the drug caters to other genotypes as well, meaning that it could easily cater to the entire market. Considering how the drug is more effective and reduces the treatment time significantly, it is expected that it will be high-priced.

Daklinza International Markets

The approval for the use of Daklinza with other hepatitis C drugs has been approved. The company has plans of marketing this drug in 28 EU states. The drug is under review of the EC for being approved as a Medical Product for Human Use (CHMP); a designation given to drugs that can be used for health interest of the public.

This is not the first market that the drug is tapping into to reach patients. In July, the drug received approval for being used in the Japanese market, where its use will be combined with Asunaprevie, the first oral ribavirin-free hepatitis C drug for the country.

The drug is also on the waitlist for approval from the Food and Drug Administration (FDA) in the United States, where its use would be combined with another drug as well. The announcement of the approval is expected before November 30th, the deadline date provided by the FDA. The FDA has already approved hepatitis C therapy of Daklinza and Asunaprevie combined, and now the company is simply waiting for approval for its drugs to be combined with others for use.

The Global Hepatitis C Market

With close to 15 million people suffering from the disease in Europe alone (according to the World Health Organization Office for Europe), the entire market for the disease stands at 150 million patients all across the world. This means that Bristol-Myers Squibb has 150 million opportunities to generate revenues if it markets its product in the right way. It is expected that this market could assume the heights of around $20 billion by 2020.

According to Deutsche Bank, Gilead Sciences could end up acquiring 80% of the market share if another viable alternatives to the disease does not come up to compete with its drug. The company is currently the market leader in the treatment for hepatitis C, and with its drug Sovaldi, it could break into a fortune of revenues. It is expected by the ISI Group that the revenues for this drug in 2014 could stand anywhere between $7 billion and $12 billion.

Considering that the drug developed by Bristol-Myers Squibb is more effective when combined with Sovaldi, the company could find itself generating a fortune as well, especially if patients and medical practitioners are encouraged to use both the drugs as a combination to beat the disease.

Gilead Stiffening the Competition

Gilead Sciences has some plans of its own, while Bristol-Myers Squibb revels on the success of being approved in Europe. Gilead has developed its own hepatitis C drug by the name of Ledipasvir. Using this drug with Gilead's very own Sovaldi is said to reduce treatment times, making it shorter than the time it takes Daklinza to be effective. The company has submitted its application for approval of Sovaldi-Ledipasvir to the EC and the FDA, and a response from the FDA is expected sometime this October.

Conclusion

Based on the happenings in the hepatitis C market in Europe and across the world, this approval for Bristol-Myers Squibb comes as positive news for investors, particularly when the performance of the drug seems to be excellent in terms of generating revenues. If the estimates of the worth of the hepatitis C market in 2020 turn out to be correct, the company could receive a massive boost in revenues that could be sustainable over the years as well. This brings good news for investors of the stock, since the earnings per share are expected to be high and prices for the share could go up significantly.

However, Gilead Sciences isn't trailing far behind, and is severe competition for the company as it slams the opportunity to collaborate with Bristol-Myers Squibb. Its steps of developing a drug that would prove to be more effective than Daklinza show that the company is adamant to remain the leader of the market that it already has a stronghold in. These steps reflect the stiffness in competition that Bristol-Myers Squibb could have to face if the use of Gilead's drugs is approved in the same markets that Bristol-Myers Squibb is currently tapping into. Thus, the future of the shares of the company are uncertain, though they aren't expected to face any dramatic decline, since the whole market is large enough to still let Bristol-Myers Squibb do well.

Source: Impact Of Bristol-Myers Squibb Getting Approval For HCV Drug Daklinza