No More Nucs: Merck & Co. Cedes HCV Market To Gilead, AbbVie

Pharma ends HCV development, pulling plug on next-generation two-drug and three-drug combos for hepatitis C and rendering the $3.9bn buyout of Idenix in 2014 a failed gambit.

Based on a review of Phase II data and market dynamics in the hepatitis C arena, Merck & Co. Inc. announced Sept. 29 that it will discontinue a pair of HCV combination therapy development programs, more or less ceding the space to leader Gilead Sciences Inc. and follower AbbVie Inc.

The announcement is the final wave of a reassessment of the HCV market. Earlier this year, Merck took a $2.9bn pre-tax intangible asset impairment charge against 2016 revenues based on its reassessment of the nucleoside polymerase inhibitor MK-3682. (Also see "Merck's Write-Down Of Phase II Nuc Illustrates Current Reality In HCV" - Scrip, 24 Feb, 2017.) MK-3682, or uprifosbuvir, was the centerpiece of the New Jersey pharma’s $3.9bn buyout of Idenix Pharmaceuticals Inc. in 2014. (Also see "Merck in $3.85bn Idenix buy to bolster hep C outlook" - Scrip, 9 Jun, 2014.)

Since 2013, Gilead has forged a dominant position in HCV sales thanks to Sovaldi (sofosbuvir), the only approved nucleoside polymerase inhibitor, and combination products (Harvoni/Epclusa/Vosevi) featuring that drug as a therapeutic backbone. (Also see "INFOGRAPHIC: Hepatitis C Market Still Has Room To Grow" - Scrip, 1 Aug, 2016.)

Merck hoped to compete with Gilead by bringing a second “nuc” to market, but ultimately fell behind AbbVie, which recently launched a second-generation combo therapy Mavyret (glecaprevir/pibrentasvir) that does not feature a nuc but is somewhat competitive with Gilead on efficacy and superior to all but Epclusa on duration of therapy. (Also see "Merck's HCV Strategy Might Be: Get To Market, Then Improve Incrementally" - Pink Sheet, 16 Nov, 2015.) (Also see "AbbVie's Mavyret Is First 8-Week Pan-Genotypic Combination For HCV" - Scrip, 3 Aug, 2017.)

Eliav Barr, Merck senior VP for global clinical development for infectious diseases and vaccines, said the number of treatment options available for HCV at present, along with a review of clinical data for Merck’s two-drug and three-drug next-gen combos, resulted in the pharma determining it would not continue investing in development of further regimens.

This effectively ceases work on the two-drug MK-3682B regimen, which included uprifosbuvir and ruzasvir (a follow-on to Merck’s NS5A inhibitor elbasvir), as well as terminating a three-drug regimen including those two compounds and Merck’s protease inhibitor grazoprevir. Elbasvir and grazoprevir comprise Merck’s HCV therapy Zepatier, approved in 2016 to treat genotype 1 and 4 HCV infections. (Also see "Merck Reaches Hepatitis C Market With Zepatier" - Pink Sheet, 29 Jan, 2016.)

“The commoditization of the [HCV] category is likely to stop almost immediately.” –Leerink analyst Geoffrey Porges

Analysts indicated that Merck’s announcement, while not surprising, leaves HCV as a two-company competition going forward. In a note headlined “Oops, they did it again. Just like that HCV comes down to two…”, Leerink Partners analyst Geoffrey Porges said safety issues Merck has seen with higher doses of elbasvir likely played a role in the decision. He added that it was likely that uprifosbuvir also “encountered some liabilities” during clinical development, despite its structural similarity to sofosbuvir.

Merck’s decision is just latest manifestation of shifting dynamics in the HCV space – other firms have exited the space given the stranglehold Gilead has on the market. Most recently, Johnson & Johnson announced its decision to end HCV development earlier in September. (Also see "With J&J’s Departure From HCV, Gilead Stands Alone In ‘Nuc’ Field" - Scrip, 11 Sep, 2017.) And the maturing nature of the HCV market itself is contributing further upheaval, causing Gilead to look toward new opportunities – like its recent acquisition of Kite Pharma Inc. – as the HCV business fades. (Also see "Gilead Offers Split Guidance For HCV; Expects Further Decline In 2017" - Scrip, 7 Feb, 2017.)

Analysts Differ On Overall Benefit To Gilead, AbbVie

Leerink plans to update its overall HCV market modeling soon, Porges added in a Sept. 29 note, but the news from Merck should prove beneficial for both Gilead and AbbVie.

“The commoditization of the category is likely to stop almost immediately, and AbbVie and Gilead should establish some sort of stable duopoly in this still massive disease indication,” Porges wrote. “The pace of erosion of Gilead’s HCV revenue should slow (being only based on patient volume and duration, but no longer price as well), and this category should now be a meaningful source of revenue for both incumbents for many years to come.”

BMO Capital Markets analyst Alex Arfaei asserted that 2017 still should be a strong year in HCV for Merck –yielding global sales of about $1.7bn for Zepatier – but that revenues then will decrease sharply as AbbVie’s Mavyret gains market share. The analyst does not see an upside for Gilead and AbbVie from Merck’s decision, however, predicting “a shrinking hep C market driven by price erosion and fewer patients available for treatment.”

Mavyret will drive price erosion, Arfaei contended, as it is being discounted by 30%-50% compared to list price so far.