If It’s Bad For Merck, It’s Good For Gilead

In the Hepatitis-C wars, small setbacks for Johnson & Johnson (JNJ) and Merck (MRK) could be good news for Gilead Sciences (GILD).

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What happened? For Johnson & Johnson, it was a decision by Japan’s ministry of health to ordered subsidiary Janssen Pharmaceuticals to put new warnings on the labels of Sovriad. RBC’s Michael Yee and team explain what that means for Gilead Sciences:

The label now warns of reported deaths and blood bilirubin tests should be performed regularly and docs should monitor and/or discontinue pts if there are abnormalities. Previously the label made no mention of these issues.

Johnson & Johnson may soon get an FDA label that allows use of Oylsio with Gilead’s Sovaldi. We don’t expect much, if any, use with this combo anymore despite the theoretical positive label update because Gilead already has a combo that replaces that regimen and the price of Olysio ($50k) makes this not feasible in our view. The price would have to be brought down which doesn’t make any sense to us. Johnson & Johnson is also looking at pre-clinical and Phase I Nukes through its acquisition of Alios recently.

For Merck, it was commentary from its earnings call that seemed less enthusiastic about its four-week Hepatitis-C treatment. Yee explains why Gilead Sciences could benefit:

Merck confirmed this morning that some 4-week data from C-SWIFT would be available at AASLD. However, the commentary was less bullish than previous conference calls suggesting the data would help “bookend” the various treatment durations that are feasible and that 4-weeks of
treatment is not necessarily relevant as long as regimens in general are competitive. They also noted that different pts will need different regimens and durations to cure especially if they have cirrhosis, etc. So at best, 4-weeks of Merck plus a nuke is only for the healthiest of pts and since 6-8 weeks is already 95-100%, the 4-week data would have to be remarkably strong to be relevant for docs.

Shares of Gilead Sciences have gained 1.6% to $112.51 at 3:06 p.m. today, while Johnson & Johnson has advanced 0.8% to $103.99 and Merck has dropped 2% to $56.46.