The Motley Fool takes on universal testing for HCV...

Article posted on 3/16/12 on Motley Fool.com. The Motley Fool's Brian Orelli, Ph.D on the economics of universal testing for HCV. He makes the case that drug companies should leverage public policy to uncover as many potential patients as possible. What Dr. Orelli missed is that every HCV drug development company with skin in the game is already doing that through the Viral Hepatitis Action Coalition. A good read anyway.

Hep C Drugmakers' Best Outcome


By Brian Orelli, PhD

March 16, 2012

Treating hepatitis C is a losing proposition. Unlike treatments for chronic diseases -- high blood pressure or diabetes, for instance -- if a hepatitis C drug does its job, the patient is cured. It's a one-and-done treatment. Since the hepatitis C epidemic peaked many years ago, hepatitis C drugmakers need to find a new source of patients.

A report published in Clinical Infectious Diseases might have the solution: people who are already infected, but don't know it yet.

Current guidelines recommend testing only people who have identified risk factors such as drug use, blood transfusions before blood-bank testing began in 1992, or unexplained liver-function abnormalities, for example -- but that misses a substantial number of infected individuals. Estimates vary, but somewhere between 50% and 75% of people infected with hepatitis C don't know it.

Most probably have the risk factors, but they're unwilling to admit to the drug use, especially if it was years ago, or have forgotten about the blood infusion. Or the doctors aren't asking the right questions to identify the risk factors -- it's a touchy subject, you know.

The solution: Test everyone. You'll get a lot of negative results -- less than 2% of the population is infected -- but you'll catch those who might not have been diagnosed before they progress to serious liver problems.

The researchers plugged everything from costs to cure rates to likelihood of progression of liver disease and a lot of additional parameters into one giant formula and concluded that it would be cost-effective to screen everyone between the age of 20 and 69. Hepatitis C leads to liver cancer and other complications, and eliminating the cost of a liver transplant -- a quarter-of-a-million-dollar procedure -- can make up for a lot of $20 tests.

Sounds good, in theory

One journal article isn't going to change public policy; that will require a recommendation from the Centers for Disease Control and Prevention, which is a slow and methodical process.

If the CDC does institute universal testing for adults, hepatitis C test makers would certainly benefit. Just keep in mind that there's substantial competition out there: Abbott Labs (NYSE: ABT ) , Roche, Siemens, and OraSure Technologies (Nasdaq: OSUR ) all sell hepatitis C tests. They don't disclose margins on individual tests, but considering the number of players involved, I'd have to guess they aren't great.

Drugmakers developing hepatitis C treatments will be the real beneficiaries if more people are diagnosed. With the cost of treatment in the $80,000 range, each new patient is quite valuable.

That is, if they're treated
As the authors of the paper point out, screening is cost-effective -- and makes drugmakers money -- only if the patients who test positive are actually treated. Hepatitis C is a chronic infection that takes years to do any real damage in patients. Unlike cancer, where there's an immediate need for treatment, hepatitis C patients can take their time.

That could mean patients are lost to follow-up. It could also mean patients wait until drugs go off patent and there are cheap generics available before taking the drugs.

Identifying more patients is good, but they're not going to be moneymakers without the help of doctors.

Something companies can control
The cure rate of hepatitis C drugs is one of the factors that determine whether testing is worth the effort. If there were no way to treat patients, identifying infected patients would be only marginally useful.

As it is, Vertex Pharmaceuticals' (Nasdaq: VRTX ) Incivek has increased the standard of care substantially. Roche's Pegasys and Merck's (NYSE: MRK ) Pegintron cure about half of the patients, while adding Incivek increases that to around 70%.

As Gilead Sciences (Nasdaq: GILD ) , Abbott, and others develop better drugs, and we get closer to 100% cure rates, the benefit of testing will increase. It would be nice to have the patients waiting when the second-round of oral medications are approved, but drugmakers might have to get the drugs approved first and then show that identifying additional patients is beneficial.

The Motley Fool comments on "The Hepatitis C Bubble"...

Posted 2/29/12 on The Motley Fool.com. Brian Orelli, PhD comments on investor 'irrational exuberance' within HCV drug developer stocks and urges caution. Having been in the pharma and biopharma industry since '93, I'm in Orelli's camp in erring on the side of fiscally conservative. The major of preclinical drugs - and even drugs in phase II development - never make it to market. That's never more been the case than in Hepatitis C drug development. The 'Phase II graveyard' of compounds that will never see the light of day is huge by any standard. 

3 Signs of a Hepatitis C Bubble

By BRIAN ORELLI, PHD, THE MOTLEY FOOL
Posted 9:37PM 02/29/12 Investing
0 CommentsText Size A A A

Gilead Sciences' (NAS: GILD) purchase of Pharmasset and Bristol-Myers Squibb's takeout of Inhibitex threw gasoline on a fire that was already raging.

But higher values in and of themselves don't necessarily mean the indication is in a bubble that's sure to pop. You have to dig a little deeper. Here are three signs the enthusiasm might be getting a little extreme.

Preclinical fever
BioCryst Pharmaceuticals (NAS: BCRX) rose 12% in one day earlier this month after announcing data on its hep C drug, BCX5191. That's not weird -- drugmakers are supposed to go up when they release positive data.

But BCX5191 hasn't even made it into the clinic yet.

Early-stage success does tend to be a better predictor of approvability for hepatitis C drugs than it is for drugs treating other indications, but I'd be very cautious reading too much into the results, especially considering how many drugs are already in the clinic.

Acquisition exuberance
BioLineRx shares more than doubled at one point last month on 675 times the volume the day before apparently because the company licensed a hepatitis C drug BL-8020 from a privately held French biotech, Genoscience.

Did it get such a good deal that the company was instantly worth twice as much? Who knows? The terms of the deal weren't disclosed. It couldn't have been worth that much, though, considering BL-8020 hasn't made it to the clinic either. Then again, see above.

My guess is that investors jumped into BioLineRx because they think having a hepatitis C drug makes the biotech a takeout target. And considering the premiums we've seen thus far, the rewards could be plentiful if they continue.

Trading in tandem
Speaking of acquisition, Idenix Pharmaceuticals (NAS: IDIX) and Achillion Pharmaceuticals (NAS: ACHN) have been long-rumored acquisition targets, especially as Pharmasset and Inhibitex were taken out.

The drugmakers have traded virtually in tandem as investors have treated them identically, expecting both to be the next M&A victor.

But it's not like they have the same pipelines. There's no reason to think they have the same risk-reward profile. Losing perspective of the underlying asset is a sure sign of a bubble.

But will it pop?
There's no doubt there's a bubble: Valuations on hepatitis c drugs are much higher than any other drug. I'm unaware of any biotech without a drug on the market that has a valuation above $11 billion, the price that Gilead paid for Pharmasset.

But whether the bubble will pop is harder to know. I tend to think that investors and companies snapping up the assets will eventually come to the realization that the rewards at these insane levels don't justify the risks.

But it doesn't have to go down like that, I guess. There are a lot of patients infected with the virus who may not be identified and still more who know they're infected and choose to wait for the next generation of medications. And the cost of not ridding the patients of the virus is fairly high - hepatitis C is a leading cause of liver transplants -- so hep C drugmakers can justify fairly high prices.

The drugs could succeed in the clinic and patients could be identified, resulting in billions of dollars in sales and a justification of the high prices.

But even in that rosy picture, not every drug is going to work. And even if it's approved, there's no guarantee it'll actually get prescribed over the rivals. Just look at the competition between Vertex Pharmaceuticals (NAS: VRTX) and Merck, whose drugs launched at nearly the same time, but Incivek has sales five times higher than Victrelis.

Even if the entire hep C drug space doesn't pop, someone is going to be left holding the bag. Be careful out there.

The Motley Fool - Investors flee Inhibitex and Idenix stock on Pharmasset PSI-938 news...

Idenix Shares Plunged: What You Need to Know
By Evan Niu, The Motley Fool
Posted 3:59PM 12/16/11 Investing

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Idenix (NAS: IDIX) are plunging today, down by 16% at the low, after competitor Pharmasset (NAS: VRUS) discontinued use of one of its experimental drugs due to safety concerns.

So what: Pharmasset's experimental hepatitis C drug PSI-938 reported complications with liver function, although the developments aren't expected to interfere with Gilead Sciences' (NAS: GILD) planned acquisition of the company. Idenix also has a hepatitis C drug in its pipeline, which is the company's current focus.

Now what: The news is causing concern among some hepatitis C drugmakers, including Inhibitex (NAS: INHX) , which is also seeing downside today. Interestingly, rival Vertex Pharmaceuticals (NAS: VRTX) is seeing healthy gains, with setbacks for PSI-938 considered positive for Vertex. Idenix's and Inhibitex's hepatitis C drugs are more similar to Pharmassets, which is causing investors to flee for cover.

The Motley Fool's Sean Williams on Inhibitex....

Inhibitex Shares Popped: What You Need to Know

By Sean Williams
December 1, 2011

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Inhibitex, one of many biotechnology companies involved in hepatitis C research, jumped as much as 13% earlier in the trading session before giving up almost all of its gains.

So what: Ever since Gilead Sciences agreed to purchase Pharmasset last week at a hefty premium, the sector has been abuzz with more buyout speculation. Optimists got more fuel for the fire earlier in the week when Inhibitex reported positive phase 2 results for INX-189, its experimental hepatitis C drug. Today's move appears to be a carryover effect of the bullishness from previous days.

Now what: To say that I'm not a fan of Inhibitex at its current valuation north of $1.1 billion might be an understatement. The company is going to face an onslaught of competition from Gilead and Pharmasset, but also from hep C drugs that are already approved by the FDA for sale, including Merck's Victrelis and Vertex Pharmaceuticals' Incivek. Then there's the fact that Inihibtex has already sold 1.9 million shares of stock into this unbelievable rally. With its leading drug candidate only in phase 2 clinical trials, there are plenty of moves left to be played in this chess game before I'd declare Inhibitex a winner. I'm so confident Inhibitex is overvalued at these levels I'm willing to bet my CAPS points on it!

The Motley Fool's Brian Orelli waxes on "HCV Warehousing 2.0"...

I don't know why, but I love reading what analysts are thinking. The touchstone is always 'hyperbole', either bear or bullish. Unfortunately, investment-related articles like this may impair what would be otherwise logical, pragmatic thinking by HCV patients and treatment providers. Orelli happens to be right about an upcoming new wave of warehousing patients for more effective...and hopefully more tolerable...medications to treat Hepatitis C, and for all the wrong reasons. Don't succumb to hype. Outside of a patient being contraindicated for treatment or some other serious life issue, there's no reason to wait 2 1/2 - 3 years for new treatments that might/might not actually make it to market. The HCV drug development landscape is polluted with once-promising drugs that never made it out of Phase II trials. What we know about HCV is that the progression of disease can be slow, but it's also non-linear. Because a patient with HCV has a fibrosis score of '0' today, doesn't mean the patient won't advance to a '3' by 2014. We also know that the more advanced the disease, the less effective the medications are likely to be. The best bet is to get treated, and the earlier the better

The Biggest Fear for Hep C Investors

By Brian Orelli
November 28, 2011

There's no doubt about it -- the hepatitis C market is huge. There are 3.2 million people in the U.S. alone infected with the virus, according to the Centers for Disease Control and Prevention.

But one of the reasons for the large number of patients could be the downfall for hepatitis C drugmakers.

Hepatitis C is a chronic disease that's slow to progress. It eventually causes liver problems including scarring of the liver or liver cancer, but that's often years after the initial infection. In fact, many of those 3.2 million Americans don't even know they're infected.

The slow progression of the disease allowed doctors to put off treatment, called warehousing, and wait for Merck's Victrelis and Vertex Pharmaceuticals' Incivek to work their way through the drug-development process. The previous generation of treatment options -- Merck's PegIntron and Roche's Pegasys -- cure only around half of the patients and had nasty side effects that weren't all that appealing, considering the flip-of-a-coin chance at a cure.

Warehousing 2.0
Clearly, many doctors and their patients have decided that they've waited enough. Incivek is off to a blustering start, registering $420 million in sales during its first full quarter on the market.

But Incivek isn't perfect. It still requires patients to take PegIntron or Pegasys, albeit for a shorter duration of time than it was used when the drugs were taken on their own. Multiple companies are going after an interferon-free regimen that would be taken orally.

Pharmasset, which is being bought by Gilead Sciences, has a hepatitis C drug candidate, PSI-7977, which looks good so far as an interferon-free treatment. Gilead has other hepatitis C drug candidates it's developing that could be used in combination with PSI-7977 if it doesn't work on its own. And there are plenty of other drugmakers, including Achillion (Nasdaq: ACHN ) , Inhibitex (Nasdaq: INHX ) , Vertex, Merck, Johnson & Johnson, and Bristol-Myers Squibb (NYSE: BMY ) , developing other hepatitis C drugs that they hope can be part of an interferon-free cocktail.

It seems entirely possible that doctors will continue warehousing all but the most-progressed patients until there's an interferon-free treatment regimen that works as well as or better than the current standard of care. If that occurs, the peak sales of Incivek would be substantially diminished.

And then ...
If patients are going to wait for all-oral interferon-free regimens, why not wait until the drugs become generic and save some money? Granted, it'll take a while to get to that stage; patients being seen by doctors right now aren't likely to be thinking that way, but it seems entirely possible that the effective patent life of hepatitis C drugs could be cut short by a few years as patients considering treatment within a few years of patent expiration might just elect to wait.

And of course, at some point, the hepatitis C market will begin to shrink. Unlike HIV drugs that aren't really a cure, hepatitis C drugs rid the patients of the virus, so as more patients are cured, the number of newly infected individuals should drop. How far in the future the drop begins will be dictated by how quickly patients get on medication, so the faster the ramp-up in sales, the sooner sales will drop off.

Far enough in the future?
That's what every hepatitis C investor has to ask: Can you capture the value now and get out before things eventually blow up?

At this point, investors seem to be ignoring the future -- Pharmasset is up more than 500% over the last year -- but that seems a little risky for long-term investors. If you're going to invest in the space for any reasonable length of time, consider a company that has its hand in more than one market. Vertex, for instance, is developing drugs for cystic fibrosis, and it's on sale.

The Motley Fool comments on the next generation of Hepatitis C drug therapy...

The Motley Fool's take on the future of HCV drug development, buyouts and partnerships. Once the fodder for small biotechs, Big Pharma has their eye on the marketplace. That means plenty of action in the coming months in the quest to usurp Telaprevir's crown.

Gunning for the Leaders

By Brian Orelli
October 31, 2011

Merck's (NYSE: MRK ) Victrelis and Vertex Pharmaceuticals' (Nasdaq: VRTX ) Incivek have been on the market for only five months, and the threats to unseat them keep coming.

Data on some of the next-generation hepatitis C drugs will be presented at the end of this week, when the annual meeting of the American Association for the Study of Liver Diseases kicks off. Add in top-line data that's been released recently and expected results in the next few months, and the hepatitis C space is looks like it'll get really crowded, really quickly.

The biotech front-runner
Pharmasset (Nasdaq: VRUS ) has grabbed most of the spotlight. The company has a drug, RG7128, partnered with Roche, but most of the focus has been on PSI-7977 that it owns in its entirety. The company will present data at the meeting including results using PSI-7977 as a monotherapy. Reducing or eliminating peginterferon, which must be used with Incivek and Victrelis, is a goal of every next-generation hepatitis C regimen because of nasty side effects with peginterferon.

Achillion Pharmaceuticals (Nasdaq: ACHN ) will make multiple presentations at the meeting, with its phase 2 compound, ACH-1625, being the most interesting. Idenix Pharmaceuticals has a pair of presentations at the meeting.

No shortage of pharma competition
Unfortunately for the smaller biotechs, Big Brother is interested in the space as well.

Earlier this month, Abbott Labs (NYSE: ABT ) said it has a drug combination that might be able to deliver cure rates as high as 90% without peginterferon. Don't write off the others just yet, though. It was a fairly small trial, and the data from more patients might not be as impressive.

Bristol-Myers Squibb (NYSE: BMY ) recently presented data for one of its compounds, BMS-790052. In a phase 2 trial, 83% of patients taking the two highest doses of BMS-790052 had undetectable viral levels 24 weeks after treatment, compared with just 25% who took just peginterferon alfa and ribavirin. But the results with BMS-790052 required adding it to peginterferon and ribavirin.

The upside to pharma's interest
Fortunately for biotechs, combination treatments are likely to be key to ridding patients of the virus. Resistance issues are common, but they can be avoided by combining medications that attack the virus in different ways.

No doubt Roche's acquisition of Anadys earlier this month was driven by its desire to get a hold of Anadys' hepatitis C treatment, setrobuvir. While we might see more acquisitions in the works, partnerships -- especially non-exclusive ones -- could be the best solution for both sides. Pharmasset has used the double-dipping strategy making pacts with both Johnson & Johnson (NYSE: JNJ ) and Bristol-Myers to combine their hepatitis C treatments with PSI-7977.

The problem with non-exclusive pacts is that they may not provide biotechs with much cash to fund their own development. On the other hand, if a biotech doesn't make too many of them, it could lead to a takeout offer.

Which combo is the combo?
It's hard to know which combination will eventually win out. When you start adding multiple drugs to each other, there's bound to be side-effect issues that aren't a problem when they're used individually. Hepatitis C is a little less life-threatening than HIV, so the FDA will demand a cleaner side-effect profile than they have for cocktails that treat HIV.

And while finding the most potent combination is important, it's useful only if they complement each other's resistance issues; knocking the virus down to undetectable levels in 100% of the patients isn't particularly useful if the virus just rebounds once it mutates in a way to avoid the drugs' inhibitory properties.

Rather than trying to guess which company will eventually profit, buying a basket of hepatitis C drugmakers might be the best move. If a combo treatment is going to eventually work, why not a combination of investments?