AbbVie Inc (NYSE:ABBV), which was spun off from Abbott Labs (NYSE:ABT) in January 2013, is well positioned to take advantage of the competitive hepatitis C virus (HCV), especially against Gilead Sciences, Inc. (NASDAQ:GILD).
The HCV market will likely be more competitive than many on the Street expect. A recent Bloomberg article featuring an interview with the Express Scripts (NASDAQ:ESRX) chief medical officer, Steve Miller, stated that the high price of the new HCV regimens is not going to be sustainable and that a less convenient, cost effective regimen could gain favorable formulary coverage.
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Such comments from the biggest U.S. drug benefits manager bode well for companies such as AbbVie. Other players, particularly in Europe, may take a similar stance.
Gilead and Johnson & Johnson (NYSE:JNJ) have established an extraordinarily high cost ceiling with Sovaldi and Olysio ($84,000 and $66,360, respectively, for 12 weeks of treatment).
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BMO Capital Markets analyst Alex Arfaei says he does not believe convenience is as important for an 8-12 week treatment regimen that produce a cure compared with, for example, chronic HIV treatment.
AbbVie could price its oral regimen at roughly $60,000 for 12-weeks of treatment, including rebates and discounts (e.g. wholesale acquisition cost, or WAC, of about $80,000 with 25 percent discounts). This should provide a significant discount relative to Gilead's Sovaldi-ledipasvir fixed dose combo (WAC of $84,000 for Sovaldi alone, maybe about $100,000 for the fully distributed cost).
Arfaei noted that these next generation costly regimens will likely be rationed for more advanced HCV patients (with fibrosis or cirrhosis). Moreover, there is a meaningful opportunity for AbbVie's relatively less convenient, but highly effective regimen as a more economic option.
Gilead estimates there are abou! t 4.1 million U.S. patients and another 2.8 million people living with the disease in the European Union. The company says less than half of those patients have been diagnosed, and less than 10 percent has been treated.
The comments from Miller mean that Express Scripts may approve Abbvie's regimen instead of Sovaldi if Abbvie's drug is priced lower. This assumes significance given Express Scripts' is the biggest U.S. drug benefits manager, whose decisions affect about 100 million patients. The company filled 1.5 billion drug prescriptions in 2013, or 38 percent of the total prescriptions in the U.S.
Recently, AbbVie released top-line phase III results for the investigational three direct-acting-antiviral (3-DAA) regimen plus ribavirin (RBV) in patients with chronic, genotype 1 (GT1) hepatitis C virus (HCV).
In the 394-patient study, 96 percent of patients who previously failed pegylated interferon (INF) and RBV treatment, including approximately 49 percent prior null responders, achieved sustained virologic response at 12 weeks (SVR12) with the 12-week regimen.
The majority of patients were GT1a, considered the more difficult-to-treat sub-type, but the regimen were equally effective in both GT1a and GT1b. Virologic relapse or breakthrough was seen in 2 percent of patients receiving the regimen. In addition, the discontinuation rate due to adverse events was 1 percent.
This is the second of six phase-3 trials studying AbbVie's 3-DAA regimen, and the results again confirmed earlier phase-2 studies. Although, this trial did not include patients with cirrhosis, one should see data in those patients from the TURQUOISE-II study expected by January 2014 and that study includes Rx naïve and experienced patients with compensated cirrhosis.
Arfaei said these are the more advanced patients, many of whom are being "warehoused" until the newer regimens are available. This is the greatest unmet need in HCV because many of these patients will need costly liver transplants.
A! bbvie's g! oal is to cure patients as completely as possible and to lift their sustained viral response as high as possible. Notably, AbbVie's regimen is proving to be more or less equal to Gilead' Sovaldi, achieving near-universal cure rates in important trials of patients with the virus' difficult-to-treat genotype 1.
But, as of now, Gilead is years ahead of competitors in treating genotype 2 and 3 patients who constitute more than 15 percent of hepatitis C patients in the U.S. Sovaldi is the only new HCV antiviral to show effectiveness in genotypes 2 and 3.
Nevertheless, the results from the recent studies potentially position AbbVie to be a stiff competitor against Gilead over an effective HCV regimen.
Arfaei forecasts a strong launch for AbbVie's HCV regimen in late 2014/early 2015, with global sales of $950 million in 2015, peaking at about $3 billion in 2018.
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