Weekly Biotech Report Covering Gilead Sciences, Inc. (GILD) and Celyad SA (ADR) (CYAD)

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For the section of our report detailing events in biotech this past couple of weeks, we’ve got two focus companies – one big, one small. They are Gilead Sciences, Inc. (NASDAQ:GILD) and Celyad SA (ADR) (NASDAQ:CYAD).

Gilead Sciences

On June 28, the FDA approved SOF/VEL under the brand name Epclusa for the treatment of all genotypes of chronic hepatitis C virus (HCV).

The Science

This one’s a big one for a few reasons, and one of them is actually the science and its implications for the drug’s potential. Epclusa is a combination of two different compounds. The first is the already approved Gilead Sciences, Inc. (NASDAQ:GILD) blockbuster Sovaldi, and the other, an antiviral drug called Velpatasvir. The latter is part of a family of drugs called NS5A inhibitors. These types of inhibitors stop HCV from replicating by inhibiting a protein called NS5A, which is responsible for transcribing viral genes in replication. The drugs that are available in this field prior to this approval target certain genotypes of HCV. There are six, and each drug targets one or more, but not all of these genotypes.

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By combining Sovaldi, which before this approval was actively used in combination with a couple of other compounds to target genotype 2 and 3, or 1 and 4, depending on the combination, with Velpatasvir, Gilead is able to target all genotypes 1-6 effectively.

The Market

The reason it is so important to be able to target all genotypes is that the current treatment process involves the use of a test to determine which type of HCV the patient in question carried. This test costs money obviously, and in certain regions, is very difficult and prohibitively expensive to get hold of. The availability of a drug that targets all genotypes means this test is no longer needed before treatment, and in turn, practically opens up the entire hepatitis C market to Gilead – a market that has classically been pretty fractured by nature of the various genotypes involved. The way we expect Gilead to market this one, however, focuses on genotypes 2-3 in nations that can and are happy to pay for the pre-treatment test. Its 1, 4 and 6 drug, Harvoni, will likely still dominate the developed market.

Gilead generates $10 billion annually from Sovaldi, and a little over $3 billion a quarter from Harvoni. Expectations are that the market for Epclusa will mimic that of Sovaldi initially and then expand based on its presence in international markets and the benefit for the full sweep treatment it offers.

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Market Reaction

Markets had pretty much priced this one in already, as there were high expectations for an approval based on the great data the company used to underwrite its NDA. Nonetheless, expect a little kick throughout the latter half of the week, as mainstream news media filters the story out to the less plugged-in investment community. They say sell the fact, but that’s not our advice here. Gilead has had a tough few months, down nearly 20% on its April highs, and this could easily be the driving factor behind a longer term reversal and an upswing towards a minimum target of the April price of $102.

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