GILD Gilead Sciences Inc

Gilead Sciences Inc.’s (GILD) HIV franchise kept up its string of success with the pipeline HIV combination pill Quad meeting the primary endpoint in a second late stage clinical trial (Study 103). The much anticipated Quad pill is a combination of Gilead’s pipeline candidate elvitegravir and cobicistat (GS 9350) and its marketed HIV drug Truvada.

Study 103 (n=708) compared Quad to a combination of ritonavir boosted Reyatazand Truvada. While Reyataz is marketed by Bristol Myers Squibb (BMY), Truvada is a fixed-dose, once-daily tablet containing Gilead's Viread and Emtriva. The data showed that the Quad pill was non-inferior to ritonavir-boosted Reyataz plus Truvada at week 48, an outcome widely anticipated by most investors. 90% of the patients who were treated with Quad achieved a reduction in viral load factor versus 87% of those who were treated with ritonavir boosted Reyataz and Truvada. The Truvada/Reyataz arm experienced a higher discontinuation rate than the Quad arm due to adverse events which was primarily driven by elevated bilirubin levels.

The late stage program for Quad pill also included Study 102 which compared the candidate to Gilead’s popular HIV medicine, Atripla. Atripla, a single tablet regimen (STR) for HIV, is jointly marketed by Bristol-Myers Squibb (BMY) and Gilead. Atripla is a combination of Truvada and Bristol Myers’ Sustiva. Last month Gilead presented positive data from the study which showed that Quad worked equally well as Atripla at week 48. Both the blinded studies will continue for 96 weeks to further evaluate the safety and effectiveness of Quad.

Gilead hopes to begin regulatory filings in the US by the end of the year, earlier than prior expectations of the first quarter of 2012. The new drug application (NDA) will include data from both study 102 and 103. Gilead will request the US Food and Drug Administration (FDA) to grant priority review status to the NDA, which if granted is expected to lead to approval of Quad by mid 2012.  We believe the positive outcomes of studies 102 and 103 will lead to approval of Quad. On approval, Quad has the potential to reach blockbuster status and become a market leading HIV medicine.

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 month, the 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) 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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