Bloomberg News

Gilead Drops After Patients Relapse on Hepatitis C Drug

February 27, 2012

(Updates shares in first, third, eighth, ninth paragraphs.)

Feb. 17 (Bloomberg) -- Gilead Sciences Inc., which fueled a land grab for hepatitis C therapies with its $10.8 billion purchase last year of Pharmasset Inc., dropped the most in 11 years after some patients on the acquired experimental medicine relapsed after stopping therapy.

Among eight patients with hepatitis C genotype 1, the most common form of the disease in the U.S., six had a viral relapse within four weeks after stopping a 12-week regimen with the medicine, GS-7977, plus ribavirin, Gilead said today in a statement. The other patients in the trial are two weeks out from stopping treatment, and haven’t relapsed, the company said.

Gilead fell 14 percent to $47 at 4 p.m. New York time for the biggest drop since January 2001. The decline narrowed the Foster City, California-based company’s gain for the last 12 months to 20 percent. Rival makers of hepatitis C drugs rose.

“Gilead announced what is unquestionably bad news,” Mark Schoenebaum, an analyst with ISI Group in New York, wrote in a note to clients today. The results could mean this kind of therapy “isn’t going to be enough in genotype 1 patients.”

The promise of a potential $20 billion market in hepatitis C, a bloodborne virus carried by 170 million people worldwide, has spurred three acquisitions in the last year.

Bristol, Roche

Bristol-Myers Squibb Co. followed Gilead with a $2.5 billion purchase of Inhibitex Inc. to gain a similar medicine to Pharmasset’s, while Roche Holding AG bought experimental hepatitis C drugmaker Anadys Pharmaceuticals in November for about $230 million.

Pharmasset’s medicine was thought to be the cornerstone of new regimens that treat hepatitis C orally, said Raghuram Selvaraju, an analyst with Morgan Joseph TriArtisan in New York, in an interview.

Achillion Pharmaceuticals Inc. and Idenix Pharmaceuticals Inc., other developers of medicines for the disease, are probably acquisition targets, Selvaraju said. Achillion, based in New Haven, Connecticut, rose 26 percent to $11.04 for the biggest increase since December 2009; Idenix, in Cambridge, Massachusetts, increased 3.9 percent to $11.91. Medivir AB, a Swedish maker of an experimental hepatitis C medicine in collaboration with Johnson & Johnson’s Tibotec unit, advanced 15 percent to 65.75 kronor, the most since July 2010.

Vertex Pharmaceuticals Inc., also in Cambridge, joined Merck & Co. last year in gaining approval for the first new hepatitis C drugs in almost a decade. Its shares jumped 4.7 percent to $39.24.

Vertex Response

“The Gilead news is positive for Vertex’s investor sentiment,” Jason Kantor, an analyst with RBC Capital Markets, wrote in a research note today. “While we think other upcoming data from Gilead will likely be more positive and 7977 is still the best HCV drug to date,” the negative data “may likely call into doubt the thesis that Incivek will essentially go to zero in 2014.”

A developing medical theory that hepatitis C can be overcome with the same type of drug cocktails that tamed HIV has driven acquisition strategies as companies try to anticipate which products work best with other medicines.

Because only a few hepatitis C drugs are approved, and others in testing may not pan out, “we don’t know what the winning formula will be,” Ben Weintraub, an industry analyst at Wolters Kluwer InThought in New York, said during a Bloomberg Industries panel last week. To raise the odds, “companies are doing M&A and starting new trials on almost a daily basis.”

While the results announced today by Gilead “disappointed,” a “disaster scenario is unlikely,” said Robyn Karnauskas, an analyst with Deutsche Bank in New York, in a note to clients.

Future Trials

The data were from a study in patients who hadn’t responded to an earlier treatment involving interferon. Gilead will consider combining other direct-acting antivirals with 7977 and longer treatment times, company executives said on a conference call today with analysts and investors.

“These data answer an important question about the use of GS-7977 and ribavirin for the treatment of genotype 1 null responder patients, suggesting that additional direct acting antivirals may be necessary to effectively treat this patient population,” Norbert Bischofberger, Gilead’s chief scientific officer, said in a statement.

“We will continue to explore a number of therapeutic approaches to address this significant unmet medical need, including combinations with other oral antivirals,” he said.

--With assistance from Ryan Flinn in San Francisco and Drew Armstrong in New York. Editors: Reg Gale, Adriel Bettelheim

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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