- Gilead Sciences, which has dominated the hepatitis C market over the past two years, on Monday said revenues declined in the second quarter as sales of its market-leading drug Harvoni continued to slip.
- Gilead also lowered its guidance for the year, forecasting between $29.5 billion and $30.5 billion in annual sales, knocking off $500,000 from original estimates.
- Rapid success of Harvoni, along with its precursor Sovaldi, had shot Gilead to the top of the hepatitis C market in 2014 and 2015. But investor worries of a shrinking market seem to be borne out by the now free falling sales of Harvoni, which totaled only $2.5 billion in the second quarter, down from $3.6 billion a year prior.
Combined sales of Harvoni and Sovaldi, which together account for over half of Gilead's product revenue, slumped by about 20% in the second quarter versus the same period a year prior.
The drop in hepatitis C revenue came even as Gilead reported about $500 million in Japanese sales of Harvoni, which was approved in that market last July and therefore didn't factor into last year's second quarter earnings.
But a sharp decline U.S. sales far outweighed the addition of revenue from the Japanese market. Compared to last year, revenue from U.S. sales of Harvoni dropped by nearly 50%.
Fewer patients began a sofosbuvir-based (the key API in both Harvoni and Sovaldi) regimens in the second quarter than any of the four quarters prior, according to Gilead. U.S. patient initiations hit 53,000 over April, May and June, compared to 62,000 patients during the same months last year.
This decline in both revenue and product volume had been expected as the hepatitis C market matured from the initial rapid gains seen when Harvoni and Sovaldi were first introduced, explained John Milligan, Gilead's chief executive offer, speaking on a call with investors.
Since the launch of the two drugs, over 1 million hepatitis C-affected patients have been treated with a sofosbuvir-based regimen, with nearly 500,000 treated in the United States. Now, only 13% of patients starting treatment had F4 fibrosis scores (a measure of severity), as opposed to a rate of over 20% last year. "With less severely ill patients, this might explain the slower rate of treatments in the last year," added Milligan.
But the company said it would not slow down, as there are still a projected three million infected people in the U.S. and only a fraction of those have been diagnosed. And Gilead recently won approval for its new pan-genotypic hepatitis C drug Epclusa, which is okayed for treatment of all genotypes of the liver disease. While over 80% of patients in the U.S. have genotype 1 versions of hepatitis C, Epclusa should help treat the 15% of patients with genotypes 2 and 3.
Gilead said Epclusa sales in the U.S. hit $64 million in the second quarter, despite being approved June 28.
In addition, the company is pushing partnerships with public providers to expand its market. Kevin Young, Gilead's Chief Operating Officer estimated that roughly 45% of payers were in the public sector, adding that the Department of Veteran Affairs, for example, was "very motivated to essentially eradicate the virus from that population."
The VA recently announced it would broaden its Hepatitis C coverage to all veterans regardless of disease progression, although Merck may have a leg up on Gilead to reach those patients. In a statement released at the same time as the VA's announcement, Merck cited a price and access strategy to expand use of its hepatitis C drug Zepatier in patients covered by public plans, as well as by commercial ones.
Zepatier also lists for $54,600 per treatment course, much lower than Gilead's Harvoni and Sovaldi (although a deal with the VA would likely include rebates or discounts, making it harder to compare prices).