Did Gilead Sciences' Sales Soar in Q4?

The ability to provide a functional cure to hepatitis C is proving to be a game-changer for patients who would otherwise be facing the risk of liver failure, but to date, the number of people that have received treatment with highly effective hepatitis C drugs made by Gilead Sciences has been limited. However, that could be changing based on a report issued by CVS Health last month which suggests the introduction of Gilead Sciences' next-generation therapy, Harvoni, is expanding overall use beyond just the sickest patients. If so, it could mean that Gilead Sciences posts better-than-expected sales and earnings for the just completed fourth quarter.

Broadening appealAccording to CVS Health, the number of eligible hepatitis C patients being treated following Harvoni's launch in October has increased.

Harvoni, which combines Gilead Sciences' first-generation therapy Sovaldi with another drug, ledipasvir, cured up to 99% of patients during clinical trials and won the FDA green light on October 10.

Leading up to Harvoni's launch, Gilead Sciences reported that sales of Sovaldi were sagging as doctors warehoused patients. However, CVS Health's study suggests that Harvoni isn't replacing Sovaldi on a one-to-one basis. Instead, it appears that the introduction of Harvoni is creating a woodwork affect that is resulting in more patients asking for and receiving treatment.

Not the sameAlthough Harvoni is a combination drug that includes Sovaldi, the two drugs are not the same and are being used to treat different patient populations.

The latest guidelines from the American Association for the Study of Liver Diseases calls for the use of Harvoni or AbbVie'snewly-launched hepatitis C drug cocktail Viekira Pak in patients diagnosed with hepatitis genotypes 1 and 4, but the other genotypes, which represent roughly 30% of hepatitis C cases, are still being treated with Sovaldi.

That's an important distinction because it suggests rising awareness of these drugs, driven by new drug launches and significant media attention, could mean thousands of additional non-genotype 1 patients are inquiring about access to these therapies, which in turn is offsetting some of the cannibalization that Harvoni is having on Sovaldi in genotype 1.

Behind the numbersCVS Health found that among the 65 million members covered by CVS Health's pharmacy benefit management business, prescription volume of Harvoni at eight weeks following its launch was roughly 2.5 times greater than Sovaldi's prescription rate eight weeks following its launch in December 2013. The number of Harvoni prescriptions at eight weeks totaled over 7,500, while Sovaldi's scripts totaled just more than 3,000 at the same point following its launch.

Source: CVS Health

Importantly, CVS Health reports that Sovaldi's use, while falling, hasn't dropped as sharply as one might have expected leading up to Harvoni's introduction.

Source: CVS Health

Looking aheadThere are roughly 3 million people in the U.S. and 9 million people in Europe with hepatitis C, yet only 117,000 of them were treated with Gilead's drugs during the first nine months of 2014. Despite the relatively small penetration, Sovaldi's $84,000 price tag for a 12-week treatment course produced total sales of $8.5 billion for Gilead Sciences during that period. That sky-high pricing has led to substantial payer pushback, including the rationalization of access to it through the use of pre-authorization programs. As a result, many patients desiring treatment have likely been turned away.

However, that may be changing. The introduction of Harvoni may have sparked additional demand across all genotypes that could suggest Gilead Sciences will report notable sequential fourth quarter sales growth, but the benefit of the woodwork effect may not be limited to Q4. The approval of AbbVie's Viekira Pak in December resulted in Express Scripts negotiating discount pricing in exchange for exclusivity and the offering of access to Viekira Pak for all eligible patients. A similar exclusivity agreement was recently reported between Gilead Sciences and CVS Health's pharmacy benefit manager, too. Although the companies involved haven't disclosed the level of price discounts agreed upon, the deals could suggest that access to hepatitis C drugs will improve this year. If so, script volume growth could offset any revenue headwinds created by price cuts in 2015 too.

The article Did Gilead Sciences' Sales Soar in Q4? 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 CVS Health and Gilead Sciences. 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.