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Gilead Sciences Firing On All Cylinders

[As an aside, we still haven't heard much about BMS-094, Bristol-Myers' seemingly troubled nucleoside polymerase inhibitor acquired through the Inhibitex deal.]

Gilead has also finalized the design for a pivotal trial of single-pill combination of GS-7977 and GS-5885, the wholly owned NS5A inhibitor that has supplanted Bristol-Myers' daclatasvir, in the difficult-to-treat genotype 1 hepatitis C subgroup. This study will explore several variations, including 12- and 24-week treatment duration and dosing with or without ribavirin. I would be surprised if the company can eliminate ribavirin from the combination regimen entirely and still generate high cure rates, but it probably doesn't make much difference to the drug's commercial prospects either way.

My final comment on Gilead's hepatitis C pipeline has to do with Wall Street analysts' focus on seemingly conflicting data reported in genotype 1 patients from two studies: The Phase II QUANTUM trial and one conducted by the National Institute of Allergy and Infectious Disease (NIAID.) In QUANTUM, Gilead reported a 53% SVR4 -- an early indicator of cure -- among 19 treatment-naive patients across all genotypes. In a much smaller group of nine treatment-naive patients with genotype 1 HCV, the NIAID study showed a 100% SVR4 rate.

On the call, management admitted that it didn't know for sure what caused the divergent results. I'm not sure either, but I'm not that concerned. QUANTUM seems to have more lenient patient follow-up than did the NIAID study or ELECTRON, another Gilead-led trial that reported an 88% SVR4 rate. Further, several arms of QUANTUM that contained another drug candidate were discontinued, which may have furthered patient compliance issues. Those factors can make a big difference. I suspect Gilead's Phase III trials of will show a cure rate in the 75-85% range, which would be more than sufficient for FDA approval.

Overall, the second quarter was clearly a good one. I'm not a huge fan of chasing stocks, so if you don't have Gilead in your portfolio, I would wait for a pullback to the low $50s per share. Eventually, some global economic anxiety will likely proffer a buying opportunity. If you're already an owner and donâ¿¿t consider yourself a trading wiz, stay put. Gilead has a reasonable multiple, solid growth prospects, and a rapidly developing pipeline across both HIV and HCV. Despite my frustration with management's refusal to pay a dividend, Gilead should be a core holding for any biotech portfolio.

Disclosure: Sadeghi has no positions in any of the stocks mentioned in this article.

Follow Nathan Sadeghi-Nejad on Twitter.

Nathan Sadeghi-Nejad has 15 years experience as a professional health-care investor, most recently as a sector head for Highside Capital. He has worked on the sell side (with independent research boutiques Sturza's Medical Research and Avalon Research) and the buyside (at Kilkenny Capital prior to Highside). Sadeghi-Nejad is a graduate of Columbia University and lives in New York. You can follow him on Twitter @natesadeghi.
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