Gilead shares fall on worries about competition, discounts for blockbuster hepatitis C drugs

Markets Associated Press

Shares of Gilead Sciences Inc. dropped Wednesday after the drugmaker's executives discussed pricing discounts and competition facing its blockbuster hepatitis C drugs.

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Sovaldi hit the market in late 2013, and Harvoni followed several months later. Both are seen as breakthrough treatments for the liver-destroying hepatitis C virus, and Gilead had a dominant hold on the treatment market early — even as it faced criticism for the drug's cost. Sovaldi, for example, costs $1,000 per pill, and its list price comes to $84,000 for a course of treatment.

But AbbVie Inc. entered the market with a competing product and started offering price breaks, and Gilead has followed suit.

Citi analyst Yaron Werber said in an email that Gilead and AbbVie are engaged in a full-blown "pricing war."

Company executives said Tuesday in a conference call that the size of the discounts it offers depends on how restrictive payers are in allowing their patients to gain access to Gilead's drugs.

Some insurers reserve coverage for only the sickest patients or impose other restrictions.

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Talk of discounts and competition is raising worries about drug pricing and how long demand for hepatitis C treatments will stay at a high level.

"We expect this commentary to stoke both fears as investors will worry that discounts will continue to increase as more players enter the (hepatitis C) market, and that the diagnosed U.S. patient population will be treated more quickly," Cowen and Co. analyst Phil Nadeau said in a research note.

There are concerns about a limited patient population. More than 3 million people have hepatitis c. But as more are treated and cured, demand for the drug could drop.

The Foster City, Calif., drugmaker said Tuesday Harvoni and Sovaldi brought in sales of $2.11 billion and $1.73 billion, respectively, in the quarter that ended Dec. 31. That helped the drugmaker's revenue more than double and its net income soar to $3.5 billion from $791 million.

Shares of Gilead dropped 8 percent, or $8.52, to $98.66 Wednesday afternoon while broader trading indexes were nearly flat. AbbVie also was down 6.7 percent, or $4.14, to $57.51.