Avisol Capital Partners
Your Daily Pharma Scoop: Gilead s Unappreciated Opportunity, Merck s Keytruda Stumble, Epizyme s Positive Results
Oct. 30, 2017 12:04 PM • gild
- Gilead’s NASH and CAR-T assets are not being assigned any value by the market.
- Merck’s MAA to the EMA for Keytruda in first line NSCLC withdrawn.
- Epizyme’s tazemetostat showed positive results in pediatric patients with relapsed or refractory INI1-negative molecularly defined solid tumors.
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Analysis of top Seeking Alpha coverage: Gilead
Today we will discuss a Gilead article titled “Gilead: The Bad News, Then The Good News, Then Some Guesses” by DoctoRx. Gilead has seen extreme decline in HCV sales, and very poor guidance – “HCV meds are guided to a midpoint of $1.1 B in Q4, down from $2.2 B in Q3 and $3.3 B in Q3 last year.” On the other hand, Gilead’s TAF-based regimens have taken off very well in HIV. Combining these two above, the author considers Gilead fairly valued at its current $100bn market cap. Thus, we are left with CAR-T and NASH, and the market seems to not assign any value to these two assets right now. This is where there’s multi-year opportunity in Gilead at its current prices.
CAR-T is an unbelievably huge space, and while Yescarta’s current approval only targets some 5300 patients, at $373,000 a pop, that’s a market worth $1.8bn. The drug is indicated for adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy, including diffuse large B-cell lymphoma (DLBCL), primary mediastinal large B-cell lymphoma, high-grade B-cell lymphoma, and DLBCL arising from follicular lymphoma. But what is important to understand here is that CAR-T is as much a logistical and manufacturing problem as it is a medical problem. Since this is an autologous therapy, Kite Pharma’s El Segundo location near LAX is critical.
As Gilead has commented, one of the reasons it targeted Kite was because Kite’s SoCal manufacturing prowess matched with Gilead’s existing manufacturing hub in the area. 16 more centers are ready for Kite’s certification as of now, and the company plans to add 30 more centers, with an eventual target of 70 centers across the USA. This is a long term play, and while we should not expect much from the carefully planned phases roll out of the therapy in the near term, Gilead is gearing up for additional label expansions and increase in patient count, for which it is readying up manufacturing.
KTE-C19 is also being advanced in various other indications. In combination with anti PD-L1 Tecentriq , it is in advanced trial in refractory DLBCL. Kite also is advancing Yescarta in second-line DLBCL, mantle cell lymphoma and pediatric and adult ALL, all in various stages of trials. If DoctoRx is right and Gilead is fairly valued at $100bn considering only HCV and HIV, then this entire endeavor is being given no value atall, to say nothing of Kite’s early stage but promising TCR therapy in solid tumors.
Then we have NASH, where Gilead recently declared positive results from a phase 2 study of GS-0976. “Data demonstrated that the higher dose of GS-0976 (20 mg taken orally once daily) when administered for 12 weeks was associated with statistically significant reductions in hepatic steatosis (buildup of fat in the liver) and a noninvasive marker of fibrosis (TIMP-1) compared to placebo.” There is an unmet need in patients with advanced fibrosis, which can lead to various complications including end-stage liver disease, hepatocellular carcinoma and the requirement for liver transplantation. This 126-patient study had the following data:
As the table above shows, there was significant decrease in both liver fat content and TIMP-1, a serum marker associated with liver fibrosis.
Gilead has a strong program in NASH and other liver diseases. its ASK1 inhibitor selonsertib is in phase 3 trial among NASH patients with bridging fibrosis (F3) or cirrhosis (F4). Earlier, phase 2 data from this molecule demonstrated “regression in fibrosis that was, in parallel, associated with reductions in other measures of liver injury in patients treated with selonsertib for 24 weeks.”
NASH is a huge market with considerable unmet need; some forecasts claim a $49bn market size by 2027. While Gilead’s isn’t the most advanced drug in the entire NASH pipeline, it isn’t necessarily true that the first to enter the market will be the best, or most profitable. Gilead has a careful way of doing things, as it did with the Kite acquisition, and its slow but steady and progress in NASH certainly deserves a lot of value, which is not being reflected in the current market cap. This discussion does not even take into consideration Galapagos’ (GLPG) filgotinib, which DoctoRx discusses briefly. Given all this, I think there’s considerable hidden potential in this most-discussed of all companies, and that the value, to extend that analogy, is hidden in plain site in its long-tailed pipeline.
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