Second, investors worry about competition. Gilead continues to aggressively develop novel HIV therapies. In late August, the company will likely receive final FDA approval for the Quad, a once-daily combination therapy that incorporates the integrase inhibitor elvitegravir with cobicistat -- a drug that "boosts" drug blood levels -- with Truvada (itself a combination of two drugs that forms the "backbone" of nearly all HIV regimens.) Although widely expected, the Quad approval and launch will be an incremental positive that accelerates the shift away from dependence on the lower margin Atripla, Gilead's current flagship HIV therapy.
Gilead's primary competitor is dolutegravir, an integrase inhibitor developed by ViiV Healthcare -- a partnership between GlaxoSmithKline (GSK) and Pfizer (PFE) -- that doesn't require boosting and has a very high barrier to developing resistance mutations. Although dolutegravir itself looks promising and likely slightly superior to elvitegravir, ViiV must combine the drug with Epzicom, a two-drug regimen rarely used by physicians due to concerns about long-term side effects. I don't consider dolutegravir a major threat unless the companies can find a better treatment backbone with which to pair the drug.
Importantly for the franchise, Gilead has quietly advanced a next generation version of tenofovir, encoded GS-7340, into Phase II trials. Management believes GS-7340 is more potent and may have fewer side effects than tenofovir, which the company sells both as Viread and as part of Truvada. Regardless of the incremental clinical improvements, GS-7340's key characteristic is its long patent life (Viread's patent expires in 2018.) Investors should keep a close eye on this drug.
Judging by the questions from analysts on Gilead's conference call, Wall Street remains obsessed with the hepatitis C. As I have said before, I'm skeptical the hepatitis C market will develop into the massive growth opportunity forecast by the bulls. Nonetheless, Gilead's R&D progress has been impressive.I expect the company will be first-to-market with an all-oral regimen, an accomplishment few people, myself included, would have predicted two years ago. In fact, it's hard to believe that Gilead finalized the $11 billion Pharmasset purchase just six months ago. As I predicted, Gilead appears to have effectively shut Bristol-Myers Squibb (BMY) out of the hepatitis C race. The company has initiated Phase III trials of GS-7977, the nucleotide inhibitor acquired with Pharmasset, in combination with the antiviral drug ribavirin for treatment naive (FISSION), interferon-intolerant (POSITRON), and treatment-experienced (FUSION) genotype 2/3 hepatitis C patients. Data from those studies should be available by early 2013.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV