GILD Gilead Sciences Inc

Gilead Sciences Inc.’s (GILD) HIV franchise received yet another boost with a late stage clinical trial of its pipeline HIV combination pill Quad meeting the primary endpoint. The much anticipated Quad pill is a combination of Gilead’s pipeline candidate elvitegravir, cobicistat (GS 9350), and Truvada. Truvada is a fixed-dose, once-daily tablet containing Gilead's Viread and Emtriva marketed for the treatment of HIV infection in adults.

Study 102 showed that Quad was non-inferior to Gilead’s another popular HIV medicine, Atripla, at week 48. Atripla is a single tablet regimen (STR) for HIV which is jointly marketed by Bristol-Myers Squibb (BMY) and Gilead. Atripla is a combination of Truvada and Bristol Myers’ Sustiva. It was observed that after 48 weeks, about 88% of the patients who were dosed Quad experienced a reduction in viral load factor as compared to 84% of the patients who were given Atripla. The data was in line with prior mid-stage results presented by Gilead in September 2010. The study will continue for 96 weeks with expected data presentation at a scientific conference in early 2012.

Besides Study 102, the late stage program also includes Study 103 that compares Quad to a combination of atazanavir, ritonavir and Truvada.  Results from the study are expected later in the current quarter. Gilead hopes to begin regulatory filings in the US in the first quarter of 2012. We believe the outcome of the studies 102 and 103 will be the most significant catalyst for Gilead in 2011. On approval, Quad has the potential to reach blockbuster status.

Gilead’s strategy of creating fixed-dose combinations of existing HIV/AIDS drugs has been a resounding success. Gilead’s most popular HIV combination medicines, Truvada and Atripla, have allowed the company to maintain robust growth in HIV product sales. Last week, the US Food and Drug Administration (FDA) approved the company’s STR, Complera, for the treatment of HIV. The drug is a combination of Truvada and Johnson and Johnson’s (JNJ) recently approved HIV drug Edurant. If approved, Quad together with Complera will further fortify the HIV franchise and help mitigate the impact of the upcoming patent expirations.

Our Recommendation

We currently have a Neutral recommendation on Gilead. The stock carries a Zacks #3 Rank (short-term “Hold” recommendation).

We are optimistic on the growth potential of Gilead’s HIV franchise drugs, Truvada and Atripla. Moreover Gilead’s strategy of creating fixed-dose combinations of existing HIV drugs has yielded enormous success. We believe Complera together with Quad, once approved, has the potential to drive sustainability of the HIV franchise. However, we are concerned about patent challenges to its key HIV drugs. We maintain a cautious stance until Complera along with the current pipeline proves its worth, compensating for lost revenues from patent lapses.

 
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