Biotech Values

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WF: $GILD $ACHN HCV Treatment Dynamics--November 2014 Edition
• Summary: Wells Fargo's biotech team (covering GILD and ACHN) and med
tech team (covering JNJ) are jointly reviewing monthly data from Symphony
Health Solutions' BrandImpact survey on patient-level dynamics of HCV
treatment, which reflects how treatment choices made by physicians are evolving
along with patient characteristics such as treatment-naïve/experienced status and
degree of fibrosis. By tracking changes in prescription choice versus changes in
patient demographic and epidemiologic data over time, the data allows us to
identify drivers in new patient start trends, and help better understand the ways
in which evolving clinical data, availability of new HCV cocktails, updates to
guidelines, and insurer restrictions may influence use patterns - and future
revenues for companies involved in the space. Our current analysis covers
tracking data for October 2014, providing insights into the state of the HCV
landscape in the first month of launch of GILD’s all-oral fixed-d0se combo
Harvoni.
• Harvoni adoption appears rapid, with prescriptions written likely
meaningfully exceeding prescriptions filled. Harvoni accounted for 39% of
new HCV treatment starts, and 50% of GT-1 starts during the month of October –
particularly impressive given that the cocktail was only approved one-third of the
way into the month (Exhibits 1 and 2). BrandImpact survey data represents
prescriptions written, as compared to IMS scrips data, which measures
prescriptions dispensed. If one assumes that most Sovaldi prescriptions are filled
at this point, superimposing this data on the IMS NRx numbers for Harvoni and
Sovaldi for the month of October, it would imply that the IMS NRx for Harvoni
should have been 25% higher than it was. This suggests at least 25% of patients
prescribed Harvoni are facing delays or a bottleneck in insurer authorization for
pharmacies to fill their prescription (and this number could be an underestimate
if Sovaldi has some backlog as well) – demonstrating even higher demand for the
cocktail than is manifested in IMS data. According to the survey, virtually all
(>97%) of new patient starts in HCV included a Sovaldi based regimen (Exhibit
1).
• October saw Harvoni eating away at the Sovaldi+Olysio regimen and
also taking share from the Sovaldi+Peg-IFN/RBV regimen. All-oral
regimens (Harvoni and Sovaldi+Olysio) accounted for 70% of new GT-1 patient
starts in October (Exhibit 2). This follows the trend seen over the previous two
months in which Sovaldi+Olysio use increased in the tracking from, to 42% in
September from 27% in August (consistent with IMS scrips data). This suggests
that the growing experience with and high appetite for all-oral therapies should
help pave a long runway for Harvoni use. Amongst all-oral therapeutic options,
the proportion of patients receiving Sovaldi+Olysio decreased dramatically, to
20% from 49% in September, and we eventually expect this regimen to all but
disappear in the U.S. in the coming months following further commercial rampup
of Harvoni.

Average fibrosis score of treated patients decreased and comorbidities remain stable. In the
latest data cut, the proportion of patients with F3/F4 fibrosis decreased to 12% from 19% (Exhibit 3). The
proportion of GT-1 patients with F3/F4 also decreased, to 14% from 19%. If this trend is real, it could suggest
the introduction of Harvoni is adding a high volume of lower-grade fibrosis patients (perhaps contributing to
insurer bottlenecks). Still, the substantially lower blended net patient price of both Harvoni and ABBV’s
likely-to-be approved 3D regimen compared to the Sovaldi/Olysio combo should ultimately help ease payer
uncertainty. Similar to last month’s data and in line with epidemiological data presented this week at the
AASLD conference, another 38% of patients started on therapy could qualify under AASLD/IDSA guidelines
as having high priority for treatment, with such co-morbidities as HIV, HBV, CV/metabolic disease and F2
fibrosis that would make them more susceptible to complications for their HCV (Exhibit 4). We believe
physicians would have a good case to make to insurers to get reimbursement for HCV treatment for these
patients.
• Treatment-naïves still dominate, but more treatment-experienced patients came onto
treatment in October. According to the survey, treatment-naïve patients now comprise 76% of new GT-1
patient starts, down from 83% in September and but still much higher than the ~65% proportion earlier this
year (Exhibit 5). This rise in treatment-experienced patients, if a real trend, in our view could be attributable
to broader pent-up demand for Harvoni among patients already plugged into the system and waiting for
Harvoni's availability to get retreated. As such, we could see this trend back down over time. Overall, the
relatively low proportion of patients who are treatment-experienced continues to suggest to us there are
likely to be relatively few treatment-experienced cirrhotics starting therapy with GILD's Harvoni or with
ABBV’s 3D regimen (which we expect to have a similar labeled duration in that subpopulation), so we would
expect relatively low use of these new all-orals in 24-week regimens.
• Methodology and limitations: For Symphony Health Solutions’ BrandImpact survey, data were collected
from approximately 50-70 U.S. clinicians, reporting data on an average of 245 new HCV patient starts per
month. Limitations of the data include a small sample size (further decreasing over the past few months
compared to earlier in 2014, which could lead to lesser reliability of the most recent data), a volunteer sample
potentially prone to selection bias, and a patient dataset possibly skewed by reflecting higher-volume
prescribers.