June 1, 2010 (Vol. 30, No. 11)

HCV Treatment Paradigms in Later Stages of Development Could Significantly Alter Landscape

The treatment of chronic hepatitis C virus (HCV) infection is on the verge of a major transformation. New drugs in the late stages of development have the potential to increase cure rates, shorten the length of therapy, and entice significant numbers of new patients to seek treatment. It is not surprising then that firms are scrambling to be among the first to get to market with these new drugs and capture a piece of the HCV treatment pie.

The stakes are high—these new therapies have the opportunity to grow the annual market from about $2–3 billion at present to $5–10 billion (or more) in the next 10 years. The race includes Merck, Roche, Bristol-Myers Squibb, and Abbott Laboratories, as well as spirited biotech companies like Vertex Pharmaceuticals, Pharmasset, InterMune, and Idenix Pharmaceuticals.

HCV infection, often referred to as a silent killer, is estimated to affect 170 million people worldwide and three million people in the U.S. Many of these patients are undiagnosed and others can be asymptomatic for years. If left untreated, however, HCV can lead to cirrhosis and liver cancer.

Many HCV patients contracted the disease from blood transfusions before the blood supply was screened for HCV in 1992. Others contracted the disease from IV drug needles, tattoo needles, and unprotected sex.

The current standard of care (SOC) is weekly injectable pegylated interferon (IFN) and twice-daily oral ribavirin (RBV). RBV helps boost the body’s immune response and while RBV’s mechanism of action is not well understood (it has little to no effect on its own), it improves the effectiveness of IFN when dosed in tandem. However, this SOC is not a panacea.

In genotype 1 patients (the predominant genotype in the U.S.), the treatment regimen lasts 48 weeks and leads to a cure in only 40–50% of patients. In addition to suboptimal cure rates, the SOC has an array of side effects including flu-like symptoms, depression, fatigue, and anxiety. Convincing patients to start and adhere to therapy can be difficult; as a result, only a small fraction of diagnosed patients are treated each year.

Treatment-failure patients have fewer options. For the more than 50% of patients who were treated with the standard of care and failed to achieve a cure (due to poor response, intolerance to SOC, lack of adherence, or disease relapse), alternatives are almost nonexistent. Retreatment with SOC has a poor success rate (less than 20%). As more patients are treated each year, the population of treatment-failure patients is large and growing.

The current treatment-failure population is estimated to be between 300,000 and 500,000 in the U.S. alone. These individuals may be among the first patients to seek therapy when new drugs are approved, and the first drugs to market will likely capture the revenue associated with treating this reservoir of patients.

Direct acting antiviral drugs are some of the oral compounds being developed to improve the treatment of HCV. The two most advanced drugs are HCV protease inhibitors—telaprevir from Vertex and boceprevir from Merck. Both products are in Phase III trials with results expected this year; potential approval and launch could occur sometime in 2011.

Hepatitis C might be amenable to treatment in the same manner as most cases of AIDS, i.e., with a therapeutic cocktail.

Based on Phase II results, these products appear to significantly increase the cure rate (65–70% versus 40–50% for SOC) and have the potential to cut the treatment duration in half for some patients. Many clinicians and patients are aware that these new drugs are advancing rapidly and some of the patients who can afford to wait are holding off on starting treatment until these new drugs are approved.

It remains to be seen how much the new drugs will expand the market. Based on the precedent set when the current SOC was introduced and the market roughly doubled, market expansion could be staggering. As new drugs with better cure rates are introduced, a greater proportion of the diagnosed patient population will be willing to be treated. Further growth could be driven by the large treatment-failure population that needs new treatment options.

Despite the excitement among clinicians, patients, and investors, these new drugs have their own drawbacks. Most importantly is that, at least at first, the new drugs will be administered in conjunction with SOC. As a result, cure rates will likely improve, but the poor tolerability of therapy will not.

In addition, the new therapies have side effects, including severe rash, severe anemia, nausea, and vomiting, that will add to the burden of the current SOC. Also, both telaprevir and boceprevir are dosed three times a day (though there is some data to suggest that telaprevir could be dosed twice a day); drugs dosed less frequently would offer improved convenience and lower the likelihood of missed doses (which could lead to drug resistance).

While these new drugs will likely see strong market adoption, they will probably be displaced over time by more effective, better tolerated, and/or more convenient drugs that could make it to market in the two to three years after boceprevir and telaprevir are approved. Literally dozens of drugs are currently in the pipeline.

A handful of companies are taking a different approach. Given the tolerability issues with SOC, firms including Roche, Bristol-Myers Squibb, and Vertex are pursuing development of combinations of new oral drugs with the goal of eliminating IFN and RBV. If any of these oral cocktails are successful, they have the opportunity to displace SOC and grow the market significantly. The holy grail is the oral cocktail, similar to what has been successful in HIV treatment (Gilead and BMS’ Atripla).

The best new drugs will have the right balance of potency, convenience, tolerability, low likelihood of resistance, and options for safely combining with other drugs. Key issues for the size and longevity of the market include: pricing, improvement in diagnosis, finding the right approach to encourage patients to come out of the woodwork, and how long patients and doctors will wait to treat, as treatment regimens improve with each new wave of drugs. In any case, there are big dollars at stake and the excitement over these new potential blockbusters seems downright infectious.

Adam Cutler ([email protected]) is life sciences analyst at Canaccord Genuity.

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