Gilead Sciences Vs. AbbVie: Surprise! Sovaldi Still Matters

Source: Gilead Sciences via Google Maps

Before investors get too worried that Gilead Sciences' grapple-hold on hepatitis C market share is coming to an end following the approval of AbbVie's new hepatitis C therapy, they should recognize that there are a number of reasons why AbbVie's Viekira Pak is unlikely to dethrone Gilead Sciences, including the fact that Viekira Pak is only approved for hepatitis C genotype 1 patients and not for patients diagnosed with the other genotypes of the disease.

Big and varied marketHepatitis C is a big and global disease. There are more than 150 million cases of hepatitis C worldwide, including 1 million cases in Japan, 3 million cases in the United States, and 9 million cases in Europe.

Although the prevalence of hepatitis C is massive, not all patients have the same type of the disease. The categories of hepatitis C range from genotype 1 (which includes both 1a and 1b variations) to genotype 6, and the genotype that is most prevalent varies depending on the region of the world. For example, genotype 1 is most common in the U.S., but genotypes 4 and 5 are most common in emerging nations.

So while genotype 1 accounts for 46.2% of all hepatitis C cases on the planet, that still leaves more than half of all hepatitis C patients being diagnosed with another variation.

That's an important fact to remember as we consider how deeply AbbVie's Viekira Pak could cut into Gilead Sciences' hepatitis C market share this year.

Source: AbbVie

Using these treatmentsLike Gilead Sciences' latest hepatitis C drug, Harvoni, AbbVie's Viekira Pak is approved only for use in hepatitis 1 patients -- but in the U.S., those drugs are going to be used in genotype 4 patients as well, where there's some evidence of their success.

According to the latest guidance from the American Association for the Study of Liver Diseases, or AASLD, Harvoni, Viekira Pak, and Sovaldi are recommended for use in genotype 1 and genotype 4 patients, but only Sovaldi is recommended for use in other genotypes.

That means that while Gilead Sciences may have to share some of the market with AbbVie in genotype 1 and 4 patients, it won't lose any market share in other hepatitis C patients.

Reaching emerging marketsIn order to reach more hepatitis C patients globally, Gilead Sciences inked a deal this past fall with a slate of generic drug manufacturers to produce generic versions of Sovaldi that could be sold in emerging markets like Africa. Those generic Sovaldis will carry a price tag that is far south of the $84,000 charged in the U.S., but given the sheer size of the patient population in these markets, it should still translate into big money for Gilead Sciences.

Emerging markets will increasingly make up a larger share of Sovaldi scripts, but Sovaldi's standing as the preferred treatment in genotypes 2, 3, 5, and 6 means that it will still bring in money in developed markets, where it commands far higher prices, too.

Shaking outWe'll have to wait for Gilead Sciences' results to see just how much revenue that translates into every quarter for Sovaldi, but given that genotypes 2 and 3 combine for 28% of U.S. hepatitis C patients, it should still mean that Sovaldi is a multi-billion dollar a year therapy. Although the bigger battle for share and dollar value between Gilead Sciences and AbbVie will occur in genotype 1, Gilead Sciences' Sovaldi is likely to maintain its monopoly in other genotypes.

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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. 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.

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