Updated with analyst defense of Gilead Sciences
The top medical officer for pharmacy benefits manager Express Scripts (ESRX) expressed concerns about high pricing for the new crop of hepatitis C pills, most notably Gilead Sciences' (GILD) Sovaldi, according to a Bloomberg story Tuesday.
Solvadi may be pitted against other hepatitis C therapies, Express Scripts' chief medical officer said, and "tough formulary decisions" will be made.
Shares of Gilead are down 4.5% to $71.84 after the Bloomberg story hit the wires. Shares of Abbvie, on the other hand, are up 4.5% to $53.51.
The FDA approved Gilead's Sovaldi on Friday and the drug is priced at $1,000 per pill, or $84,000 for a 12-week course of therapy.
Abbvie's Hep C regimen is expected to be approved next year. If the company prices the drug cocktail right, it may gain extra market share and revenue, based on the Express Scripts comments today.
Shares of Enanta Pharma (ENTA), which contributes a drug to the Abbvie regimen and will receive royalties on sales, are up 18% to $35.10.
Here are some tweets from Bloomberg reporter Drew Armstrong on the interview with Express Scripts' chief medical officer:
$ESRX CMO: Says convenience won't = formulary coverage, all other things being equal. 1-pill-day not enough to trump price. Drew Armstrong (@ArmstrongDrew) December 10, 2013ISI Group analyst Mark Schoenebaum sent an email to clients noting that Express Script covers approximately 100 million people and is estimated in 2013 to fill about 1.5 billion drug prescriptions, or 38% of the total presciptions filled in the U.S.
Schoenebaum also offered a defense of Gilead:
While competition in GT1 patients is intense, GILD is meaningfully ahead (years) of other companies in approval of a regimen to treat GT2/3 patients. Therefore, Express Scripts would appear to lack the ability to block GILD's regimen in GT2/3 patients (~20% of hepatitis C patients in the US) at least in the near term (unlikely an issue in 2014).
While the efficacy of both GILD and ABBV regimens in genotype 1 (~75% of hepatitis C patients in the US) looks good, there are differences between regimens which may make pitting the two companies against each other more difficult - the # of pills for GILD's regimen are significantly less, GILD's regimen includes a nuc which has a higher barrier for resistance, ABBV's regimen includes ritonavir which may interact with other drugs patients may be taking, etc. Therefore, a big price differential would likely be necessary to block GILD's regimen. In a two-player market (before other competitors reach the market), whether ABBV would be willing to take a large price cut is not clear. Thus, the larger risk to price could be pushed out until ~2017 when other competitors are able to reach the market.
We do not yet know how GILD will price in GT1 with its regimen combining sofosbuvir with an NS5a (and perhaps ribavirin) but also potentially being shorter (8 wks rather than 12 wks) for many patients. Note, the cost of currently marketed hep C therapy (Incivek/Victrelis with peginterferon and ribavirin) in genotype 1 is ~$80-100K.
Select the service that is right for you!COMPARE ALL SERVICES
- $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
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV