GS7977- Gilead Sciences hepatitis C program

Investment Commentary

Gilead Sciences Makes Headlines With HIV Prevention Pill, Looks to Hepatitis Drugs for Future

By Brett Chase Sep 14, 2012 12:05 pm @ minyanville.com

Investors look to early next year when a moment of truth arrives for the biotech's hepatitis C program. Shares are trading at a record level and some analysts see the stock rising much more.

MINYANVILLE ORIGINAL

Gilead Sciences (GILD) made news this summer when US officials cleared the company’s drug Truvada to be used as the first treatment for the prevention of HIV.

Truvada, a big-selling product used in patients already infected with the virus, was approved by the Food and Drug Administration in July, an event that represented a milestone in the long battle against AIDS. The move was controversial, too. The drug draws fire from those who say a preventative medicine will give high-risk individuals false hope that they won’t contract HIV.

Gilead has dominated the market for HIV treatments and yet expanding the use of Truvada isn’t expected to mean a great deal to the company’s bottom line or Wall Street’s view of the big biotech. To be sure, Gilead continues to produce promising new drugs in this area as demonstrated by the recent US approval of a four-in-one treatment called Stribild, which should improve margins for the company’s HIV business. (See Five Things to Watch as Gilead Launches New HIV Drug.)

But after owning the HIV drug market for years, Gilead is pushing into another potentially big area with development of next-generation hepatitis C treatments. And the moment of truth will soon arrive for this closely watched new treatment program.

A number of investors know this story well. Hope for better hepatitis drugs has helped push Gilead shares up more than 50% this year. and shares are trading at an all-time high. The stock rose more than 2% to $61.70 Friday morning.

But the hepatitis story potentially becomes much bigger next year. Investors will parse study data for a pair of Gilead’s experimental hepatitis treatments following release of research expected at a medical meeting in November. Interim analysis, so far, has looked good for Gilead. But the closer Gilead gets to presenting final study data for the lead drug, GS7977, early next year, the more momentum will build for the company’s stock. That is, if all goes well and there are no safety or efficacy issues. If all goes as planned, Gilead will file for US approval by midyear. Looking past next year, Gilead hopes to apply for approval of a combination of GS7977 and another experimental drug that potentially creates an even better treatment. For now, the lead drug is in the spotlight.  

“All this data minutia should be coming to an end in six months,” ISI Group analyst Mark Schoenebaum says. “We’re going to have an answer. Is Gilead’s drug safe and does it work? I think it’s going to work. I think the cure rate is going to be over 80%.”

By early next year, Schoenebaum says, more investors are going to jump on Gilead’s shares. He believes growth investors, in particular, will buy the stock. Schoenebaum’s advice: Buy the shares now before they explode. While some analysts now see the stock rising to $70 per share in the next year, Schoenebaum predicts Wall Street estimates will set price targets between $80 and $100 per share by early 2013.

“I think you need to buy this stock now,” the analyst says. “I think you need to be there for the (late-stage) data. If you’re a value manager and you can’t handle data risk, stay away, but if you’re a growth manager, this is just one you’ve got to own.”

The risk: Failure in the program could send the shares down to around $40 each, he says.

With any clinical program, risks abound. Already, a pair of rival drug makers have been hurt by safety issues. Bristol-Myers Squibb (BMY) scrapped its hepatitis drug program due to patient heart issues. A patient in a Bristol-Myers study died of heart failure. The FDA put a hold on two drugs being studied by Idenix Pharmaceuticals  (IDIX) because of concern there may be similar safety problems. (See Idenix Drops After FDA Puts Hold on Another Hepatitis Drug.)

Gilead has tried to reassure Wall Street about drug safety by pointing to a large patient pool of more than 2,000 people receiving GS7977. So far, Gilead hasn’t seen the type of cardiac issues seen with Bristol-Myers’ drug.

“There’s always risk here but, in my mind, we’re beginning to enter the point --given the size of the safety database -- we can feel pretty good about the safety” of Gilead’s drug, Schoenebaum says.

Twitter: @brettchase

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.

Read more: http://www.minyanville.com/sectors/biotech-pharma/articles/gilead-sciences-gs7977-hiv-hepatitis-c/9/14/2012/id/44017#ixzz26UIquhgT