A potential goldmine Hepatitis C is a disease transmitted through contact with infected blood. It can lie dormant for years. But ultimately it can lead to either liver failure or cancer – both of which have a high mortality rate.
For now the only treatment involves taking interferon to boost the immune system, plus a long course of drugs. This is a very unpleasant regime, with side effects that range from fever to heart failure.
Worse still, it's not especially effective, with success rates as low as 40% for some individuals. As a result, some people choose to avoid the treatment altogether, hoping that options will improve before their health declines further.
Another major problem with hepatitis C is that many sufferers don't even realise that they have it. Thanks to ineffective screening of donated blood before the 1990s, many people were accidentally infected when they had transfusions during an operation.
The latest estimate suggests that as many as 3% of American "baby boomers" (those born between 1945 and 65) could have the disease. Overall, 3.2m are infected in the US alone, and up to 200m people worldwide.
That's a huge number – and even this could understate the extent of the problem. The medical body that advises US politicians suggests that people over a certain age, or who received blood before 1992, should be routinely screened.
In short, hepatitis C is incredibly serious, and very widespread, even within developed countries. In turn, that means there is a huge market for an effective treatment. GBI Research thinks that spending on this area will rise from $2.6bn to $14.9bn by 2018. Other estimates reckon this could be as high as $20bn.
That's a potential goldmine. So it's no surprise that several drug companies have tried to discover a better treatment. Yet despite the large amounts invested, all we have to show so far is a number of high profile flops. For example, Bristol-Myers Squibb had to drop one drug, due to serious side effects.
The most promising hepatitis C treatment But there are still a number of drugs in development. And of them all, Sam Isaly of the Worldwide Healthcare Trust believes the most promising is one discovered by biotech firm
Gilead (Nasdaq: GILD).
A frequent problem with complicated treatment regimes – such as the one for hepatitis C - is that patients end up being unable to follow the regime to the letter.
So one big benefit of Gilead's treatment is that it simplifies the process. It removes the need for regular injections of interferon and other medications, and replaces them with a one-a-day pill.
Trials suggest that this dramatically boosts the treatment success rate – by up to 100% – while cutting down the number of side effects. The treatment period is also far shorter.
Thanks to the impressive results seen so far, and the limited alternative treatment options, the US health regulator – the Food and Drug Administration - has given the drug "priority review". This means it could be approved for use as early as December, even though it is still going through the final set of trials.
This means that unless something very unexpected happens, Gilead is all but guaranteed a big share of the market.
Gilead has plenty of potential in its pipeline Clearly, Gilead's potential hepatitis C treatment is its biggest asset.
However, Gilead is by no means a 'one or bust' biotech. Its pipeline is full of interesting products. It is also working on a treatment for hepatitis B. Hepatitis B is generally less serious than its cousin, and usually disappears on its own.
However, in a small number of cases it can turn into a chronic condition that is linked with higher levels of liver disease and cancer. And because it's so widespread – roughly a third of the world's population has had it at some point in their lives – there are a large number of chronic sufferers. Indeed, some studies suggest that it is second only to smoking as a cause of cancer. So this is another huge market for Gilead to tackle.
It is also making progress on developing new drugs to treat HIV. While treatment for HIV has improved massively in two decades, there is always demand for new pills that reduce the side effects of existing treatments. These include a loss of bone density and impaired kidney function.
There are also promising cancer, respiratory and liver drugs in the pipeline. Assuming these are successful, Gilead's revenue is expected to double over the next three years, from its current $19.5bn level. That would put it on a price/earnings ratio of 9.8 by 2016.
The stock should be easy enough to buy via a stockbroker who deals in US stocks (as the major brokers do). If you'd rather invest in the sector via a fund, then both the London-listed
Biotech Growth Trust (LSE: BIOG) and the
Worldwide Healthcare Trust (LSE: WWH) own Gilead as part of their top 10 holdings.
And if you're interested in the biotech sector – which is one of the most fascinating investment areas around right now, in my view – you should find out more about my colleague Tom Bulford's biotech newsletter. Tom has lots of experience at delving into speculative sectors like this and sorting potential winners from losers, so he's the perfect guide to the industry.
Find out more here.
Got a comment on this article? Leave a comment on the MoneyWeek website, here. Until tomorrow,
Matthew Partridge
Senior Writer, MoneyWeek
Our recommended articles for today...
Run, don't walk, from the Royal Mail flotation - The government is going to privatise the Royal Mail. Bengt Saelensminde gives ten good reasons why you shouldn't go anywhere near it.
Run, don't walk, from the Royal Mail flotation
Video: Who are the bond vigilantes? - 'Bond vigilantes' are said to be ready to pull the plug on bond prices at any moment. In his latest video tutorial, Tim Bennett explains why they are something of a myth.
Video: Who are the bond vigilantes? And for
Friday's market update, see below...
No comments:
Post a Comment