This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Closer Look at Gilead's Slowing Hep C Prescriptions

Stocks in this article: GILDMRKABBV

NEW YORK (TheStreet) -- The number of prescriptions written for Gilead Sciences' (GILD) hepatitis C drug Sovaldi are showing signs of slowing growth, even a marginal decline, in the past month. Is this the beginning of the highly anticipated "re-warehousing" of patients, or is some other factor at play? What does this ultimately mean for Gilead going forward?

Sovaldi has been the best drug launch in history with first quarter sales of $2.3 billion, and is on pace for another record quarter when Gilead reports earnings in July.  Weekly Sovaldi prescription numbers (through the week of June 13) are charted below by ISI Group analyst Mark Schoenebaum. The incredible, vertical red line is Sovaldi, but notice the flattening of the curve in the past month.

A Sovaldi slowdown was expected this summer because doctors and hepatitis C patients are anticipating the U.S. approval of Gilead's next hepatitis C drug, ledipasvir, which will be combined with Sovaldi into a single pill. As we get closer to the FDA approval decision for ledipasvir in October, it makes sense for less acutely sick hepatitis C patients to wait for Gilead's newer and more convenient, single-pill therapy. If this recent flattening of the Sovaldi prescription curve is, indeed, just a warehousing of patients waiting for the Sovaldi-ledipasvir combo pill, then it should have a marginal impact on Gilead's stock price and its long term prospects. Prescription growth will re-accelerate when Gilead's single-pill therapy hits the market.

A second, but less likely, reason for the Sovaldi slowdown is a treatment capacity constraint for hepatitis C patients. In other words, there are only so many patients that U.S. doctors can see and treat in a given quarter, and thus only so many Sovaldi prescriptions that can be written. I'm not sure we've ever seen a drug hit a treatment capacity limit, but it exists, at least theoretically, and would result in slowing prescription growth.

If demand for Sovaldi treatment is overwhelming doctors, then don't expect prescriptions or sales to re-accelerate with the approval/launch of ledipasvir. More likely, Gilead's hepatitis C prescription curve would remain flat (barring a sudden increase in the number of doctors capable of treating hepatitis C patients.) Is this a negative for Gilead? It might be perceived that way, but in reality, treatment constraints would only extend the tail of hepatitis C sales as patients wait longer to be seen by their doctors. A potential risk is competition. Abbvie (ABBV), Merck (MRK) and Bristol-Myers Squibb (BMY) are racing their own hepatitis C therapies towards approval, so a delay in treating patients might create a larger market opportunity for them.

Insurance companies and some politicians have complained loudly about Sovaldi's $84,000 price tag. Restricting patient access to Sovaldi by insurance companies could explain the slowing prescription growth and would be a significant negative for Gilead. That being said, I find it hard to believe insurers are capable of denying access to Sovaldi over the long term given the drug's outstanding efficacy. At best, insurance companies might slow Gilead's hepatitis C sales and extend the treatment tail.

Of the three explanations for Sovaldi's recent slowdown outlined  above, I believe what we're seeing is most likely the re-warehousing of hepatitis C patients waiting for Gilead's single-pill therapy. If I'm right, the company's hepatitis C prescriptions and sales will resume the vertical growth we saw earlier this year. The alternative explanations can't be ruled out entirely but seem less likely.

Sobek is long Gilead.

David Sobek has been writing on biotech for a number of years through various outlets with a general focus on small cap oncology and antibiotics companies. He received his PhD in political science from Pennsylvnia State Univeristy in 2003 and a BA in international relations from The College of William and Mary in 1997.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • 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 Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,399.67 +19.26 0.12%
S&P 500 1,904.01 +17.25 0.91%
NASDAQ 4,316.0740 +57.6360 1.35%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs