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Pfizer Inc. (PFE), GlaxoSmithKline plc (ADR) (GSK): Can This HIV Drug Challenge Gilead Sciences, Inc. (GILD)’s Domination?

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ViiV Healthcare — a joint venture by Pfizer Inc. (NYSE:PFE) and GlaxoSmithKline plc (ADR) (NYSE:GSK) formed in 2009 with both companies transferring their HIV assets to the new company — got approval from the Food and Drug Administration for its first new HIV product, Tivicay. Its original developer is Japan’s Shionogi Pharma, which the group joined last year.

The drug has the potential of raising the groups’ fortunes to the tune of $5 billion provided it is able to grab market share from rivals, particularly Gilead Sciences, Inc. (NASDAQ:GILD).

This article focuses on the HIV branded drug market with emphasis on Tivicay.

Gilead Sciences, Inc. (NASDAQ:GILD)

Tivicay — tackling pricing and AIDS activists
Tivicay is designed as an add-on drug to two existing drugs, Ziagen and Zeffix, whose generic versions are already in the market.

It is to be priced at $1,175 per month, which is, according to a company spokesperson, “within the range of third agents used to treat HIV and reflects the benefits of Tivicay as part of combination antiretroviral therapy.” In comparison, Gilead Sciences, Inc. (NASDAQ:GILD)’s three-drug combination, Complera, costs $1,704 per year, and its four-in-one combination drug Stribild sells at almost $2,400.

Pricing of HIV drugs and their availability in poor countries has been a sensitive matter. Medecins Sans Frontieres, an international medical and humanitarian aid organization, has already taken up the issue of Tivicay’s pricing criticizing ViiV’s access programs in the developed world. The group believes that the company’s “business strategy will result in dolutegravir being priced out of reach in countries excluded from ViiV’s licensing deal.”

The positive side of the criticism
The concerns of MSF should, however, be taken as a positive for financials of Tivicay. The group wouldn’t care much had it not seen some promise. This was evident when it made a strong case for Tivicay, saying that it is “well tolerated and extremely effective at stopping the HIV virus with a high barrier to HIV resistance.”

Additionally, the drug is backed by two of the most recognized names in the pharmaceutical industry. Both Pfizer Inc. (NYSE:PFE) (revenue of $58.99 billion and net income of $14.57 billion) and GlaxoSmithKline plc (ADR) (NYSE:GSK) (revenue of $42.56 billion and net income of $8.18 billion) have deep pockets and the necessary marketing skills to take on competition and grab market share in developed countries.

ViiV Healthcare grants voluntary licenses to generic companies, allowing them to produce low-cost versions for poor countries. According to a GlaxoSmithKline plc (ADR) (NYSE:GSK) spokesperson, subject to approval by the local regulator, Tivicay may be available in South Africa for as little as R300 ($29.82).

Branded HIV drugs — the story so far
The human immunodeficiency virus (HIV) was discovered nearly four decades ago, and the first AIDS patient in the U.S. was observed in 1981. Since then, more than three dozen drugs — including single selling agents and combination drugs — have been approved by the FDA for treatment of HIV/AIDS.

Despite patent expirations of early HIV drugs in mid 2000s, the industry continued to innovate and was able to come up with new blockbuster drugs. Johnson & Johnson recorded sales worth $1.41 billion in 2012 for Prezista, while Bristol-Myers Squibb’s Reyataz contributed $1.52 billion to the company’s revenues.

Gilead Sciences, Inc. (NASDAQ:GILD) gave the early developers a run for their money with its combination drugs — first with Atripla, a fixed-dose combination drug approved in 2006, which recorded sales of $3.57 billion in 2012, and later with Truvada, a fixed-dose combination of two antiretroviral drugs, reporting sales of $2.11 billion in 2012 after approval in July 2012 for prophylactic use.

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