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Hepatits C: Upcoming Events Should Drive Stocks

|Includes: Gilead Sciences, Inc. (GILD), JNJ, OSUR

Over the next 4 weeks, there will be an incredible amount of news regarding Hep C pharmacotherapy. This includes an FDA advisory committee meeting for JNJ's simpeprevir (10/24), an advisory committee for GILD's sofosbuvir (10/25), and the AASLD (liver disease) conference in early November. I would expect the advisory committee meetings to go well for both drugs.

I don't have time to detail, but it is important to realize that Hepatitis C is treated differently based on factors such as genotype, IL 28 subtype, viral load, prior treatment and extent of disease. Furthermore, the drugs under development, called Direct Acting Antivirals, have different targets, which include NS3/4A, NS5A and NS5B. For example, Gilead's sofosbuvir inhibits NS5B, JNJ's simeprevir inhibits NS3/4A, and Bristol's daclatasvir inhibits NS5A. These different classes will be used in combination, with or without ribavirin, in an all-oral drug regimen that has superior efficacy (high cure rate). I expect the NS5B's to be the cornerstone of therapy, and for Gilead's sofosbuvir to be the leader. With a favorable panel outcome, I believe that JNJ's simeprevir will be used off-label with Gilead's sofosbuvir in Genotype 1 patients (Genotype 1 accounts for 75% of US patients), based on reported results (which will be updated at the AASLD) of the COSMOS study.

One of the disconnects involving Wall Street is that, at virtually every sell side firm, the analyst who covers Gilead is not the one who covers JNJ. Additionally, Merck, AbbVie, Bristol-Myers and Boehringer, amongst others, are also developing drugs, which adds to the information overload and analyst coverage. As an aside, consensus revenue expectation for sofosbuvir in 2014 is around $2 billion, whereas I am at $8 billion. I continue to recommend Gilead, and am also suggesting purchase of JNJ. I would also buy OraSure for its diagnostic test. My target price for Gilead remains $140.

Disclosure: I am long GILD, JNJ, OSUR.