By Peter Loftus
Most pharmaceutical-company investors would be thrilled at the
prospect of a new drug reaching annual sales of $2 billion to $3
billion. But the hit AbbVie Inc. shares took Friday shows how high
expectations have become for new hepatitis C drugs.
AbbVie Inc. Chief Executive Richard Gonzalez said Friday he
expects the company's new hepatitis C treatment, Viekira Pak, to be
selling at an annualized clip of more than $3 billion by the end of
2015. "We believe we have potential to capture a meaningful share"
of the hepatitis C market, he said on a conference call with
analysts.
But because Mr. Gonzalez characterized the $3 billion prediction
as a year-end "exit rate"--not a full-year forecast--some analysts
calculated that full-year 2015 sales would come in closer to $2
billion, reflecting a ramping up throughout the year.
A $2 billion drug in its first full year on the market would
still be impressive by historical standards, but in the case of
Viekira Pak it falls short of analysts' current consensus forecast
of about $2.8 billion--and short of what investors have come to
expect for new hepatitis C drugs. AbbVie shares were off 3.5% at
$60.91 in recent trading. Earlier Friday the stock fell to
$60.12.
The market for new hepatitis C treatments took off last year, as
Gilead Sciences Inc. launched Sovaldi and then Harvoni, a pill that
combines Sovaldi with another drug. Analysts estimate Gilead's
combined sales for both drugs in 2014 were more than $12 billion;
Sovaldi alone racked up more than $8.5 billion in sales for the
first nine months of 2014, making it the fastest-selling drug
launch in history. Gilead started facing competition when Viekira
Pak hit the market in December.
The new drugs have higher cure rates, fewer side effects and
shorter treatment durations than older drugs that were standard
treatment just a few years ago. The segment has been particularly
lucrative in the U.S. because the companies are charging high
prices, and because there are at least 3.2 million Americans with
chronic hepatitis C infection. Viekira Pak costs about $83,300 a
patient for a 12-week treatment, while Harvoni costs about $94,500
for a 12-week treatment.
Some critics have called the price tags excessive. A Senate
committee last year began an investigation of Gilead's pricing for
Sovaldi, and a transit agency in Philadelphia recently filed a
federal lawsuit against Gilead accusing the company of
"price-gouging." IMS Health estimates global spending on hepatitis
C drugs will reach about $26 billion in 2018.
Analysts and investors are now scrutinizing every twist and turn
in what has rapidly become a huge market--but one with competitive
and clinical dynamics that make it tough to predict how long drug
companies can count on the eye-popping revenue.
"These are mind-boggling numbers," said Michael Yee,
biotechnology analyst with RBC Capital Markets. But he said some
investors already are concerned that the hepatitis C market will
peak and then decline somewhat within the next few years, as the
pool of patients needing treatment shrinks, and as other companies
including Merck & Co. introduce new treatments, which is likely
to fuel pricing pressure.
Some level of price competition has already begun, with AbbVie
and Gilead offering insurers, pharmacy-benefit managers and state
Medicaid programs undisclosed discounts in exchange for making
their drugs the preferred option for patients on the health
plans.
Analysts said some of the pressure on AbbVie's stock Friday
reflected investor concern that AbbVie has been more aggressive in
discounting than previously thought. Mr. Gonzalez said he didn't
believe the discounts AbbVie has been offering were unusual, though
he didn't quantify them.
On Friday, AbbVie said U.S. doctors wrote about 1,100
prescriptions for Viekira Pak from its December introduction
through Jan. 16. AbbVie reported fourth-quarter sales of $48
million for the drug. Mr. Gonzalez said deals with health-care
payers have made the drug available to about 40% of insured
patients in the U.S., including some in which Viekira Pak is the
exclusive option. European regulators approved AbbVie's drug for
sale this month.
AbbVie reported a fourth-quarter loss of $810 million, or 51
cents a share, on costs associated with its scuttled plan to
acquire Shire PLC for $54 billion last year. Excluding those costs
and other items, AbbVie would have earned 89 cents a share on $5.45
billion in sales, more than analysts' expectations and up from
earnings of 82 cents a share on sales of $5.1 billion in the
year-earlier period. Sales of AbbVie's biggest drug, the
anti-inflammatory treatment Humira, rose 11% to $3.36 billion in
the quarter.
Write to Peter Loftus at peter.loftus@wsj.com
Access Investor Kit for Gilead Sciences, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US3755581036
Subscribe to WSJ: http://online.wsj.com?mod=djnwires