Biotech Values

[DewDiligence]

IDIX GSK – This 2007 article from CNNMoney describes GSK’s
predicament of having owned a portfolio of essentially obsolete
HIV drugs and shows the motivation GSK had to partner with
IDIX on IDX899. Inasmuch as this article is 15 months old, the
sales figures are out of date, but the qualitative discussion of
the HIV market dynamics remains valid.

http://money.cnn.com/2007/11/19/news/companies/hiv/index.htm

›HIV Market Mutates

By Aaron Smith
November 19 2007

The market for treatment of human immunodeficiency virus, or HIV, is mutating as rapidly as the virus itself, and drug industry heavyweight GlaxoSmithKline could find its lead position in jeopardy.

The $8 billion drug market for HIV will shift dramatically as it expands by nearly 50 percent through 2016, according to analyst Mansi Shah from the research firm Datamonitor [#msg-26915744]. More than two-thirds of the current crop of HIV drug patents will expire in the next decade, said Shah.

"The biggest casualty in this evolution will be GlaxoSmithKline, which will see its long reign as the undisputed king of the HIV treatment market come to an end, as its aging portfolio of HIV drugs gradually lose their patent protection," said Shah, in her report, released in October.

Shah said biotech developer Gilead Sciences Inc. and the pharmaceutical company Bristol-Myers Squibb have emerged as Glaxo's key challengers.

"I think GlaxoSmithKline has already lost the battle," said Jason Zhang, analyst for BMO Capital Markets. "Gilead drugs already account for more than 55 percent of patients treated [for prescription volume.]"

Glaxo spokesman Mark Meachem declined to comment. Gilead officials were not immediately available for comment.

Gilead's products are also overtaking Glaxo in terms of sales, despite the fact that Glaxo has no less than eight drugs in its HIV franchise.

Glaxo's HIV sales totaled $2.2 billion during the first nine months of 2007, slipping 1 percent from the year before. But sales for Glaxo's flagship HIV drug Combivir dropped 10 percent in the first nine months to about $700 million.

Meanwhile, the sales for Gilead's HIV drug franchise grew by nearly half during the first nine months of 2007, to about $2.3 billion, just barely eclipsing Glaxo sales. During that time, Gilead's stock surged 26 percent.

Phil Nadeau, analyst for Cowen & Co., expects Gilead's HIV annual sales to reach $3.1 billion in 2007, and to keep climbing to $6.4 billion in 2012.

The most dynamic product behind the market shake-up is the drug Atripla, a combination pill of Bristol's Sustiva and Gilead's Emtriva and Viread launched last year.

HIV treatment regimens were once notorious for their complex daily juggling of drug cocktails, fueling a need for simplified combination drugs. Atripla is popular because it's taken once a day and is effective, according to Les Funtleyder, analyst for Miller Tabak.

Atripla sales reached nearly $650 million in the first nine months of 2007, almost ten times its sales from the year-ago period.

"HIV [treatment] is all about combination," said Zhang of BMO, who projects that Atripla's annual sales will grow to $2.7 billion by 2010, eventually peaking at close to $4 billion.

Another drug combo, Truvada, has also contributed to Gilead's success. Sales for the drug exceeded $1.1 billion in the first nine months of 2007, up from $850 million during the same period last year.

Zhang of BMO believes that sales for Truvada, itself a combination of Emtriva and Viread, will peak at $1.6 billion in 2007.

But even Gilead might have to look over its shoulder. Analysts say the next big participant in the market could be a combination of Prezista, released last year by Johnson & Johnson's subsidiary Tibotec, and Merck & Co. Inc.'s Isentress, which entered the market in October. However, Tibotec spokeswoman Pam Van Houten and Merck spokeswoman Amy Rose said their companies have no plans for such a collaboration.

Both companies say they're focused on getting their drugs approved by the Food and Drug Administration for patients who have not been treated before. Isentress and Prezista are currently approved only for patients who tried other types of treatment first.

Tibotec is also awaiting the FDA's decision on an experimental AIDS drug called TMC125. The decision could come as early as January, Van Houten said. [TMC125, a.k.a. Intelence, was approved in Jan 2008: #msg-26126733; however, it is dosed BID, which is a major drawback in the HIV market given that Atripla and Truvada are dosed qD.] Tibotec is also starting late-stage testing for another experimental AIDS drug, TMC278 [#msg-35447718].

Also, Pfizer Inc.'s Selzentry was approved by the FDA in August, bringing another HIV anti-viral to the market. [Selzentry is IMO a niche product.]

"A lot of people are interested in new combinations and new approaches to HIV, and a lot of that has to do with the fact that it's a quickly mutating virus," said Funtleyder of Miller Tabak. "The more new therapies, the better."‹