What Could Sustain Gilead’s HCV Franchise Revenue?



HCV franchise

According to Wall Street analysts’ projections, Gilead Sciences’ (GILD) total HCV (hepatitis C) product revenue will decline YoY (year-over-year) by about 9.8% from $19.1 billion in 2015 to $17.3 billion in 2016.

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Decline in revenue

In 2016, the total revenue from sales of Sovaldi and Harvoni are expected to decline on a YoY basis by about 5.5% and 11.8%, respectively. This is mainly due to exhaustion of the warehoused demand in the US market—a trend that’s expected to repeat across all of the markets in the world. Also, the company expects to witness a price reduction for its HCV drugs in the Japanese market due to regulatory changes.

On January 28, 2016, the FDA (U.S. Food and Drug Administration) approved Merck’s (MRK) Zepatier to treat adult patients suffering from genotype 1 and genotype 4 HCV. In addition to AbbVie (ABBV) and Johnson & Johnson (JNJ), Merck is also expected to pose tough competition to Gilead’s HCV franchise. The competition could force Gilead Sciences to give heavy discounts to health insurers for including the company’s HCV drugs in their formulary.

In such a scenario, Harvoni’s strong existing label and recent label expansions are key factors. They’re expected to enable Gilead Sciences to maintain its competitive position in the HCV market.

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Strong label

Gilead Sciences’ HCV drugs, Sovaldi and Harvoni, proved to be breakthrough therapies. They managed to report cure rates up to 99%. The real world cure rates for Harvoni have either matched or exceeded the rates projected during clinical trials.

The FDA recommended resistance testing for genotype 1 HCV patients before using Merck’s Zepatier. The therapy displayed low cure rates in these patients. This resistance test costs of about $700. It also causes a time delay before the treatment.

If Zepatier has to be administered to HCV patients for 16 weeks, they have to be tested at eight weeks and 12 weeks for elevated levels of alanine ALT (aminotransferase). As a result, these tests could result in higher final costs for payers than the costs for eight or 12-week Harvoni therapy. WebMd explained that “ALT is measured to see if the liver is damaged or diseased. Low levels of ALT are normally found in the blood. But when the liver is damaged or diseased, it releases ALT into the bloodstream, which makes ALT levels go up. Most increases in ALT levels are caused by liver damage.”

Harvoni’s strong label reinforced by real-world data and additional test-related costs for using Zepatier could give Gilead Sciences higher bargaining power in price negotiations with health insurance companies.

Label expansion

On November 12, 2015, the FDA expanded Harvoni’s label to include patients suffering with genotype 4, 5, and 6 chronic HCV as well as those co-infected with HIV (human immunodeficiency virus). Also, Harvoni combined with ribavarin therapy for 12 weeks was approved as a substitute for the 24-week Harvoni therapy. It’s given to genotype 1 HCV patients with cirrhosis. These patients had already been treated with at least one HCV therapy. These approvals increased Harvoni’s target market. It will ensure stable revenue in 2016.

Harvoni’s strong efficacy and safety profile is expected to be a prime factor in driving Gilead’s future stock performance. It could also boost the share prices of the iShares Core S&P 500 ETF (IVV). Gilead Sciences accounts for about 0.8% of IVV’s total portfolio holdings.

In the next part, we’ll explore how Gilead Sciences is managing its HIV drug portfolio amid market competition.


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