Why Gilead Sciences and AbbVie Care About This Tiny Company

By Markets Fool.com

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Source: Gilead Sciences via Google Maps.

Investors are focusing on AbbVie's hepatitis C drug and its potential impact on Gilead Sciences' hepatitis C market share if it wins FDA approval later this month. However, they might also want to keep an eye on Achillion Pharmaceuticals , a small company that could report interesting midstage trial data this month.

Advancing a cure
Over the past five years, the focus for hepatitis C research has been on developing a functional cure. Prior to the launch of Vertex Pharmaceuticals'Incivek in 2011, the side effect-laden combination of peginterferon and ribavirin cured just 50% of patients. Although Incivek was better, it only cured about 80% of patients.

Gilead Sciences' launch of Sovaldi in December 2013 was game-changing. Sovaldi, which is taken orally rather than injected like previous therapies, cured 90% of patients and eliminated the use of peginterferon for many.

Equally game-changing is Gilead Sciences' second-generation hepatitis C drug, Harvoni, which won FDA approval in October. Harvoni cures up to 99% of patients and does away with both peginterferon and ribavirin. That's impressive, but at $94,500 for a 12-week treatment, it's not cheap. If AbbVie's three-pills-daily cocktail is approved and can undercut Harvoni's price, it stands a good chance of winning some market share.

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I previously discussed reasons why AbbVie's cocktail could struggle to win over prescribers of Harvoni. However, regardless of AbbVie's potential short-term threat to Gilead Sciences, investors should recognize that the next battle for hepatitis C market share is more likely to be fought over treatment duration rather than cure rates bordering on 100%.

Source: Achillion Pharmaceuticals

Shortening treatment durations
Achillion is working on an adjunct therapy, ACH-3102, that can be used alongside Sovaldi to limit treatment to eight weeks or less.

During a small phase 2 trial, Achillion reported that combining ACH-3102 and Sovaldi cleared the disease in 100% of patients who received the drugs for eight weeks. That matches up nicely against Gilead's Harvoni.

Harvoni can be used for as little as eight weeks in about 40% of patients. To qualify, patients must not have been previously treated, must not have liver disease, and must have viral loads of hepatitis C that are below 6 million IU/mL.

This last requirement is particularly important to investors; nine of the 12 people who were functionally cured by ACH-3102 and Sovaldi had viral loads greater than 6 million IU/mL. That means ACH-3102 could conceivably shorten treatment duration to eight weeks for far more people than Harvoni.

That news must have captured AbbVie's attention, too. AbbVie's cocktail, which should get a yes or no decision from the FDA on Dec. 21, is dosed for 12 weeks. If Achillion's study results in larger trials show patients can be cured over a far shorter period than AbbVie can offer, then any potential market share AbbVie captures could prove be short-lived.

Possibly, even shorter
Based on its success in treating patients over an eight-week period, Achillion is studying a six-week treatment regiment for ACH-3102 and Sovaldi. Results are expected before year-end, and if they're positive, then it could ultimately be Achillion, not AbbVie, that poses a bigger threat to Gilead Sciences' Harvoni.

The article Why Gilead Sciences and AbbVie Care About This Tiny Company originally appeared on Fool.com.

Todd Campbell owns shares of Gilead Sciences. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends Gilead Sciences and Vertex Pharmaceuticals. The Motley Fool owns shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.