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business newsBetting on Gilead's New HIV Drug
By
Brett Chase
Sep 20, 2011 11:00 am
By proving that its four-in-one AIDS drug is at least as safe and effective as existing treatments, Gilead has a potential blockbuster product. The company is seeking US approval sooner than expected.
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After announcing a key study showing its so-called quad drug is comparable to a combination of other medicines already on the market, Gilead says it will seek US approval for its new treatment by the end of this year, which is earlier than expected.
President and Chief Operating Officer John Milligan said on a call that Gilead will seek a priority review of the drug by the Food and Drug Administration and the company hopes to win approval to sell quad by the middle of next year. In a company study, quad worked as well as its own Truvada and Bristol-Myers Squibb’s (BMY) Reyataz. Gilead is banking on a more convenient, once-daily pill for HIV patients to help drive future sales.
Shares of Gilead rose 2% to $40.68 in morning trading Tuesday. The stock rose 6% in the past five days as investors anticipated the study results. The shares are up 11% this year.
Gilead, a leader in AIDS treatments, needs a new product to replace the expected loss of sales of big-selling HIV drugs such as Atripla and Truvada, which will lose patent protection and face competition over the next decade. Those two drugs accounted for $5.6 billion in sales, or about 70% of Gilead’s total revenue in 2010.
“Quad is a key to Gilead extending the life-cycle of its dominant HIV franchise beyond the latter part of this decade,” Robert W. Baird analyst Thomas Russo says.
The quad pill combines two of Gilead’s older treatments, Viread and Emtriva, with a couple of experimental drugs. The experimental drugs are elvitegravir and cobicistat, a booster drug similar to Abbott Laboratories’ (ABT) Norvir. The success of the drug depends on demand for a more convenient therapy. Instead of taking multiple drugs, a patient would take quad just once a day.
In an earlier study, quad was shown to be as effective as Atripla. (See Gilead Scores Win with Quad Drug Study.)
The bear argument for quad is that doctors may not be swayed to switch patients to a medicine that’s only as good as existing treatments.
That’s the view of Stifel Nicolaus analyst Maged Shenouda. He estimates that if quad is approved by next year, the drug’s sales will peak at $800 million by 2015. He has a hold rating on the stock.
But bulls on this stock say the drug is a potential blockbuster. Quad may generate $1 billion in sales by 2014, Leerink Swann analyst Joshua Schimmer says. He recommends buying the stock and predicts its price will reach the low $50s in the next 12 months.
Twitter: @brettchase
No positions in stocks mentioned.
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