A Comprehensive Comparison Of Gilead's Harvoni And AbbVie's Triple HCV Regimen: What The HCV Marketplace May Look Like In 2015 And Beyond

| About: Gilead Sciences, (GILD)
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Summary

Gilead's Harvoni will dominate AbbVie's HCV regimen in the market place because in all instances, Harvoni is the safer and more effective drug.

Physicians’ primary concern is the well-being of their patients. AbbVie’s regimen requires ritonavir and ribavirin (most cases) which greatly increases side effects and risks of anemia. Harvoni is the best choice.

As pricing decreases and regimens improve, more patients will be treated, but the sheer numbers will allow massive profits for at least a decade or more.

Gilead shares have dropped 15% over AbbVie's regimen approval and loss of market share due to pricing. The time to buy Gilead is now. Assume 30%-50% upside in 2015.

I have been asked by multiple followers to write this piece contrasting Gilead's (NASDAQ:GILD) Harvoni and AbbVie's (NYSE:ABBV) triple regimen which will soon be approved with a PDUFA date of 12/22/2014. This article will compare and contrast the regimens in detail and attempt to explain the pros and cons of each regimen in a simplified manner for investors. I will also discuss my prediction on regimen pricing, how that may play out in the market place, and the future direction of HCV.

Background:

I have been an active contributor writing articles in the Hep C landscape, and recent articles by myself and others have laid a pretty comprehensive framework for how Harvoni will take 80+% of the Hep C market share. What has not been fully discussed in detail is the ins and outs of each regimen on a detailed basis, and why physicians and payers will make this choice. About 6 months ago, a fellow contributor that I hold in high regard wrote an excellent article on this topic. My article will extend this discussion by discussing finalized clinical data, pricing and the future direction in HCV.

Discussion:

Everyone knows that the HCV community is massive, but even pharma companies (Gilead and Merck (NYSE:MRK)) have both stated on occasions that their projections were way off. In the US, it is projected that over 4 million Americans have HCV (diagnosed and undiagnosed). Abroad, the projected numbers vary, but a conservative consensus is in the 16-20 million range. It is important to note that curing HCV is a multi-mechanism event (cocktail), where multiple drugs hitting multiple targets leads to superior cure rates and decreased regimen times. To quickly introduce these targets, NS3 protease inhibitors were first to hit the market in 2011 and provided a huge advance for patients with HCV at the time. Another major target is the NS5A polymerase inhibitor class which is currently the most competitive class in my opinion. Third is the NS5B polymerase inhibitor class. This class is divided into nucleotide inhibitors and non-nucleotide inhibitors in which nucleotide inhibitors have a big advantage due to their pan-genotypic potency and superior profile. Sovaldi is the only approved medication in this class (approved for Genotypes 1-4) and is currently the standard of care earning over $8B in the first three quarters of 2014 alone. Figure 1 is a clear depiction of the 3 classes.

Figure 1. Major HCV targets of interest

Gilead Based Treatments

It is important to note that Harvoni's launch results have already outpaced Sovaldi's launch, and is composed of Sofosbuvir (NS5B nucleotide polymerase inhibitor) and Ledipasvir (NS5A polymerase inhibitor). The clinical results of Harvoni have been spectacular providing 94% cure rates in chronic HCV treatment naïve patients in 8 weeks (99% in 12 weeks), and 94% cure rates in HCV treatment experienced patients with and without cirrhosis in 12 weeks or 99% cure rate in 24 weeks. Aside from efficacy, this regimen is safe, effective and convenient being prescribed once-a-day for 8-12 weeks for the majority of patients. Being one tablet once-a-day is critical as missed doses lead to resistance and relapse making less doses optimal. It is important to note that ribavirin is not needed for efficacy in this regimen which comes along with a whole host of unpleasant side effects such as anemia. This is clearly shown from the Phase III trial where Harvoni patient groups showed <1% adverse event of anemia compared to Harvoni with ribavirin which showed 9% and 12% in the 12- and 24-week regimens, respectively. It is also important to note that Gilead is by no means done in HCV. Gilead is in development (Phase III) with an improved NS5A inhibitor compared to Ledipasvir. GS-5816 has been specifically engineered to improve the SVR in the hardest to treat patients with cirrhosis, liver disease, and HIV. In addition, I must point out that Harvoni is only a combination of 2 of the known mechanisms. You can bet that Gilead is designing a regimen with all 3 mechanisms. In fact, in November 2013, the NIH conducted a trial testing various potential Gilead regimens in the clinic. In a small trial of 20 patients with advanced HCV (70% Genotype 1A, 28% had stage 3 liver disease), the combination of all 3 mechanisms were tested. At this time, Harvoni was not approved so the regimen contained sofosbuvir, ledipasivir, and an internal NS3 protease inhibitor (GS-9451, now Vedroprevir). The triple cocktail results were amazing. The triple cocktail (ARM C) resulted in a 100% SVR4 in all 20 HCV genotype 1 patients with only 6 weeks of treatment. Gilead has obviously followed up on this result, and a Phase II trial on this regimen is ongoing in hard to treat HCV patients. With the high bar already set for HCV treatment naïve patients (99% cure rate), the only room for improvement is in the hardest to treat patients and with decreased regimen times.

Figure 2. Gilead's triple combo regimen in HCV Genotype 1 advanced patients shows 100% SVR in 6 weeks

AbbVie based regimen

Let's start with discussing the regimen in general followed by a more detailed investigation into the individual agents and trial results. AbbVie's regimen is a combination of all 3 mechanisms, with the NS5B inhibitor being a non-nucleotide inhibitor. This regimen has achieved high cure rates, but requires ribavirin for improved efficacy in most patient populations (exception GT1B) and ritonavir as a booster. AbbVie's regimen is 12-24 weeks (24 weeks hardest to treat patients) and should be approved by the FDA on or before 12/22/2014. This regimen is given twice daily for a total of 6 pills when given with ribavirin.

AbbVie's regimen contains an NS3 polymerase inhibitor ABT-450. Little has been disclosed directly about ABT-450 except for the fact that it has poor human pharmacokinetics (NYSE:PK). To non-scientists, this means that the body metabolizes this drug readily which leads to low levels in the body and diminished efficacy. To combat this, AbbVie added ritonavir to its regimen, a known potent CYP 3A4 inhibitor to boost levels of ABT-450 in the body. Although this seems like a great idea, it is not because it complicates the regimen for physicians and patients and increases the risk of the regimen. CYP 3A4 is the most abundant cytochrome P450 enzyme in the body used to metabolize and break down drugs. Based on the fact that HCV patients are not generally in the best health and are normally taking multiple other medications simultaneously, a CYP 3A4 inhibitor such as ritonavir can simply complicate or make a regimen not possible. If a patient takes other drugs such as simvastatin for high cholesterol, inhibiting CYP 3A4 would lead to a toxic build-up of the drug which could be potentially fatal. Because of this, physicians must be very careful when prescribing this regimen as drug-drug interactions could lead to fatal consequences. A detailed but not fully comprehensive list of drugs not to be given with ritonavir is shown below due to this drug-drug interaction.

Table 1. Ritonavir Drug-Drug Interactions

Ombitasvir (ABT-267) is the NS5A polymerase inhibitor in AbbVie's regimen, and Dasabuvir (ABT-333) is the NS5B non-nucleoside polymerase inhibitor in AbbVie's regimen. It is important to note that since Dasabuvir is not pan-genotypic, AbbVie's regimen will likely only be approved for GT1 patients.

Based on AbbVie's Phase III triple regimen data, SVR12 rates for HCV GT1A treatment naïve patients was 97% with ribavirin and 90% without ribavirin. This is significant as ribavirin causes a whole host of nasty side effects such as anemia. In this study alone, hemoglobin levels were tested and found that 42%-50% of the patients treated in the regimen + ribavirin group experienced hemoglobin levels below the normal range which can be categorized as anemia, compared to just 3.4% in the regimen without ribavirin. Where the regimen excelled was with GT1B patients. In this subset, 99% of patients were cured in 12 weeks with or without ribavirin. In the treatment experienced group without cirrhosis, 96% were cured in 12 weeks in the presence of ribavirin. In this study, 42% were found to have hemoglobin levels below the normal level. Based on AbbVie's Phase III Turquoise-II trial of HCV patients with cirrhosis, it is clear that AbbVie's regimen works better for HCV GT1B patients than GT1A patients. In 12 weeks, GT1A patients had a cure rate of 88% compared to 98% for GT1B patients. By 24 weeks, GT1A had a cure rate of 94% compared to 100% for GT1B patients. It should also be noted that 11.1% and 15.7% of the patients in the 12- and 24-week study had serious anemia-related adverse events, with 50% of the patients having hemoglobin levels below normal.

Figure 3. AbbVie's Phase III trial of HCV GT1 Patients with Cirrhosis

Comparison: Harvoni vs. AbbVie regimen costs

The retail price of Harvoni is $63k for 8 weeks and $94.5k for 12 weeks of treatment in the US. Different payers receive special discounts such as a 23% discount on Sovaldi for US government health plans and most recently a 41% discount for Veterans, making the price ranges $48k-$72k or $37k-$56k, respectively. Roughly 50% of patients without cirrhosis taking Harvoni are cured in 8 weeks of treatment, with the additional patients (99%) being cured in the 12-week regimen. With treatment experienced patients including cirrhosis, the cure rate is 94% in 12 weeks and 99% in 24 weeks making the retail cost per patient overall (includes all patient classes) $100k ($75k for many payers) which is a large discount compared to a $500k liver transplant. It is important to point out that Harvoni is given once a day in a single pill to help compliance or selective compliance. Selective compliance leads to higher relapse rates and resistance which only drives costs up further. Also, it is important to note that ribavirin is not necessary and thus adds no cost or complications, such as hemolytic anemia and depression, which increases treatment costs to payers tremendously.

My prediction is that AbbVie will price their regimen without ribavirin at $55k-$70k for 12 weeks of treatment. AbbVie will not obtain a label for an 8-week treatment option. Ribavirin is estimated at $800/month making a full 12-week regimen cost $57.5-$72.5k. The average cost per patient overall, including the hardest to treat patients, would be $65k-$80k. This price range would offer AbbVie's regimen at a slight discount or the same price as Harvoni's 8-week regimen, but $20k less than the retail price of Harvoni providing a 20-25% discount. This discount could be used to try and convince payers to give AbbVie market share. However, the risk of hemolytic anemia (12%-15% of patients) and hospitalization fees may counteract this discount, and actually cost payers more if they try to go with AbbVie's regimen. In an interesting article regarding Incivek-based regimens after commercialization which required ribavirin as well, anemia was the #1 reported adverse event. From the group that developed anemia, "48% of the patients required treatment with epoetin alpha, 9% needed blood transfusions, 8% were treated with granulocyte colony-stimulating factor (G-CSF), 13% required hospitalization, and 10% made emergency department visits." This expense was shown to add approximately $15k per regimen overall in the 147 patient study based on treating anemia-based adverse events only. With this being said, physicians will be less likely to prescribe AbbVie's regimen for the majority of patients where ribavirin is needed. The subgroup that could most benefit are the treatment naïve GT1B patients that do not require ribavirin. However, that subpopulation would also benefit from the 8-week Harvoni regimen priced similarly for a shorter duration with less side effects and more convenient dosing. It should also not be forgotten that AbbVie's regimen requires ritonavir to boost exposure of AbbVie's protease inhibitor. This comes with a whole slew of potential drug-drug interactions (discussed previously) since ritonavir is a potent CYP3A4 inhibitor (the most common cytochrome P450 enzyme used to metabolize drugs). Ritonavir only complicates this regimen further and places for liability on physicians to avoid potentially fatal drug-drug interactions when patients are taking multiple medications.

Future impact on HCV:

Sovaldi and Sovaldi based-regimens are the current market leaders and for good reason. The Harvoni regimen is very efficacious with cure rates up to 99%, and is the safest and most convenient regimen for patients. AbbVie's triple combination is an improvement on Sovaldi or protease inhibitors that required ribavirin and interferon. However, the side effect profile compared to Harvoni is far inferior based on potential anemia risks and drug-drug interactions. In 2015, I predict Sofosbuvir-based sales to continue in the range of $10B-$13B providing Gilead with huge earnings of >$10/share. I predict AbbVie's regimen to earn >$2B based on payer incentives and new alternatives. However, AbbVie's regimen will fall like many others before it in 2016 when Gilead improves its regimen further with a more efficacious double and triple combo already in development. In simple terms, we've seen AbbVie's best shot with their triple. In addition, other competitors such as Merck already have a regimen in Phase III that is superior to AbbVie's regimen because ritonavir and ribavirin are not needed for efficacy. Bristol Myers (NYSE:BMY) is also not far behind along with Johnson & Johnson (NYSE:JNJ) and others. I would predict a fall in revenue for AbbVie's regimen similar to Incivek as Sovaldi and Olysio came on the scene. That would mean about $2B earned in 2015 followed by a drop to under $1B in 2016 and almost obsolete in 2017 despite the huge population of HCV patients.

Investment rationale:

With such a large number of people infected with HCV both known and unknown, it will take decades to treat everyone based on cost alone. Gilead's Harvoni regimen is best in class and will continue to provide huge earnings for years to come, with further improvements planned for 2015-2016. Gilead has been beaten down in the market recently (15% below the 52-week high) based on concern of AbbVie's pricing and patent war initiative. Gilead is by no means a one-trick pony and their commercial products continue to increase revenue quarter by quarter. Their pipeline is beyond healthy with new improvements in HIV (TAF), HCV (new double and triple combos), and cancer. Not to mention, Gilead is flushed with cash and could potentially make an acquisition to fuel it further. After AbbVie's HCV approval later this month and pricing is announced, I predict a large upswing in Gilead as weeks pass and script numbers support continued dominance of Sofosbuvir-based regimens. My prediction for 2015 is $130-$150/share providing a 30%-50% increase for loyal shareholders.

Disclosure: The author is long GILD.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is not investment advice and is my opinion. I am not an investment adviser and any trades should be carefully considered prior to placing an order. All data in this report is public knowledge through company transcripts, editorials, and peer reviewed journal articles.