The Hepatitis C virus (HCV) is thought to infect over 150 million worldwide, many of whom don’t even know they have the disease due to its multi-year (sometimes decade-long) gestation period. Traditionally, Interferon and Ribivirin have been used to treat the disease. More recently, however, a better understanding of the disease has led to a host of newer, more effective, medicines being developed by numerous drug companies, which we will explore below.
Why are Drug Companies Focusing on this Particular Disease?
Recent discoveries of better ways to combat and cure the ailment have led to a proliferation of clinical studies testing more complex compounds, which are relatively less expensive to bring to market. In addition, the incidence of HCV has grown over the last five to ten years, leading to greater demand for more effective cures. The rise is partly due to a growing number of baby boomers in the western hemisphere exhibiting symptoms resulting from transmission, which occurred in the 1960s. Shared needle use at home and abroad during the Vietnam War years, and an increase in the prison population, are two reasons for the rising number of cases. Often asymptomatic for years (even decades), chronic infection can lead to cirrhosis, liver failure, liver cancer, and/or life-threatening esophageal diseases. HCV is spread by blood-to-blood contact. As such, blood transfusions, shared needle use, and improperly sterilized medical or dental equipment can spread the disease. The latter is specifically prevalent in developing countries in Asia, The Middle East (i.e., Egypt, with a 22% infection rate), India, and Africa. Body piercings and tattoos are less common causes of the disease, as is vertical (Mother to child) transmission (a 6% incidence rate). It is estimated that there are upwards of 160 million people worldwide who have contracted HCV, possibly 180 million. According to the World Health Organization, over 350,000 die from related illnesses each year. There are about 110,000 new cases a year in the United States, with annual deaths ranging from 15,000 to 20,000. There is no vaccine against the virus, hence the high demand for medicines that offer a cure. About 50%-80% of treated patients are cured under current drug therapies.
Current treatment is in the form of a combination of pegylated Interferon and the antiviral drug, Ribavirin. Standing out from the crowd is Pegasys, marketed by Roche Holding AG , and PEG-Intron made by Schering-Plough (acquired by Merck & Co. (MRK - Free Merck Stock Report)). Pegasys, in combination with Genentech’s Copegus (now owned by Roche) is also a standard HCV medicine. Merck also makes Boceprevir, a protease inhibitor that binds to the HCV active site on the genotype 1 variety. But rapidly occurring drug resistance, as well as the ongoing and troubling side effects of these HCV drugs, has prompted scientists to come up with a new class of compounds that inhibit replication of the virus. These compounds target a key protein that is needed by the virus to replicate. And because they are designed to get rid of only one element, they have a lower toxicity profile, and a more effective cure rate. There are a number of clinical trials using these newer compounds being undertaken by small publicly traded drug companies. FDA approval of some of them could be imminent.
How Investors Can Capitalize on the New Therapies
On November 21st, a relatively small biotech company named Gilead Sciences (GILD) made headline news in the pharmaceutical investment community when it acquired a little-known hepatitis C drug developer named Pharmasset Inc. (VRUS), for $10.8 billion, in an all-cash deal. The $137-a-share offer was of particular note in that it represented a massive 89% premium over Pharmasset stock’s closing price, and was 94% higher than the 20-day moving average. This premium was the most ever for a medical drug acquisition greater than $500 million, and represents the length an acquirer will go to buy a company with a novel HCV fighter. Pharmasset’s oral drug is called R7128, and recently showed very favorable results from a four-week clinical trial. The announced takeover sparked a plethora of rumors regarding the potential takeover of other companies with new HCV compounds in clinical trials. Of note, is Inhibitex (INHX), which has a HCV drug similar to R7128 called INX-189. This oral product was potent, well tolerated, and showed no serious side effects in clinical trials. INHX stock rose dramatically after the Gilead/Pharmasset deal was announced. Another highly toted HCV-drug company is Idenix (IDIX), which has a slate of five experimental HCV drugs. This company’s most advanced treatment is IDX-184, a nucleotide polymerase inhibitor. Achillion Pharmaceuticals (ACHN) is another frontrunner, with three experimental drugs in clinical trials. But topping the list is Vertex (VRTX), which has a veritable plethora of HCV drugs in late-stage clinical trials, which are used either alone, or in combination with other drugs. Rounding out the list of prospects is Abbot Labs (ABT), with three inhibitors close to FDA approval (ABT 450, 072, and 333), Medivir, and Boehringer Ingelheim.
The competition to find the perfect cure is fierce because the potential revenue is huge. Stocks of the aforementioned drug companies should be researched for both their takeover potential (specifically INHX, IDIX, and ACHN) by larger companies like Merck, Bristol Myers (BMY) and Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report). They should also be looked at as individual entities with exciting new HCV prospects.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.