Pharmas aim for the hepatitis C market

Although Abbott has recently gained on positive trial results, Gilead Sciences remains in the forefront of the market.

By Stock Traders Daily Oct 19, 2012 9:02AM

Comstock Images JupiterimagesBy Barry Cohen

 

Abbott Laboratories (ABT) shares rose a few days ago on encouraging tests results for its new treatment for the liver disease hepatitis C. But the rally proved to be short lived. The culprit: once Abbott splits into two separate businesses by the end of the year, the pharmaceutical company will have a substantially higher tax rate..

 

The increased tax rate has dampened investor enthusiasm for the company's shares, which are down substantially since the hepatitis news. Still, for the year, Abbott is up some 16%.

 

Abbott's hepatitis C trial announcement evidently sent shivers down the spines of Gilead Sciences' (GILD) shareholders. The latter's shares were off sharply Monday before an end-of-the-session rally limited the day's drop to just 40 cents.


Traders must have feared that Gilead ran the risk of being overtaken in the race for supremacy in the worldwide market for new hepatitis C treatments. After all, the stakes are high, with the market expected to reach $20 billion by 2020, according to Bloomberg.

 

Order was restored quickly, though, with Gilead making a nice recovery. Evidently, investors seem to think that Gilead's two-drug regimen is going to prove superior to Abbott's and other competitors when all is said and done. One big drawback of the Abbott regimen is that it contains the drug ritonavir, which physicians don't want to use.

 

That's far from saying Gilead will have the market all to itself. According to an article in Bloomberg, Catherine Arnold, an analyst with Credit Suisse Group AG in New York, is projecting that Gilead would have $3.8 billion in hepatitis C sales in 2020, and Abbott would follow with $2.5 billion.

 

Another major player is expected to be Bristol-Myers Squibb (BMY), with $1.3 billion. The company reported this week that one of its drug combinations helped patients who hadn't previously been treated for the viral infection.

 

Given that the hepatitis C treatment market is so lucrative, it's attracted other players as well. Companies testing therapies, either alone or in partnership with others, include Achillion Pharmaceuticals (ACHN), Idenix Pharmaceuticals (IDIX), Merck (MRK) and Vertex Pharmaceuticals (VRTX).

 

For now, Gilead is still King of the Hill. The company has an 800-patient trial underway, and it's possible results of this study could be reported at the American Association for the Study of Liver Diseases' annual meeting next month in Boston. If that happens, we might see Gilead apply for Food and Drug Administration approval as soon as the middle of 2014.

 

Given recent developments, Stock Traders Daily has produced detailed trading reports for the stocks mentioned in this article. These include integrated risk controls and price targets.

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