Generic Risk For Gilead’s Hepsera – Analyst Blog

Gilead is currently reviewing the letter. We expect the company to file a patent infringement suit against Sigmapharm Labs within 45 days. This should prevent the regulatory body from granting final approval to the generic manufacturer for 30 months or until a district court rules against Gilead’s patent, whichever occurs earlier.

Although Hepsera made up 4% of total revenues of fiscal 2009, we do not expect the generic filing for the drug to have any major negative impact on total revenues. Sales for the drug have been declining over the last few quarters with Gilead transferring patients from Hepsera to Viread. Gilead’s Hepsera was the market leader along with Bristol Myers Squibb Co.’s (BMY) Baraclude till August 2008. However, Hepsera has been rapidly losing market share to Viread following its launch. Hepsera sales declined 20% to $271.6 million in fiscal 2009.

The HBV market is highly competitive and is dominated by players like Bristol Myers Squibb, Novartis AG (NVS), Merck & Co. (MRK) and Roche Holdings Ltd. (RHHBY).

Neutral on Gilead

We currently have a Neutral recommendation on Gilead, which is supported by a Zacks #3 Rank (short-term Hold rating). We remain optimistic on the growth prospects of HIV drugs, Truvada and Atripla. The company is looking at increasing its presence in the Asian HBV market, where the infection is quite prevalent. We are also encouraged by progress made by the company with its pipeline. However, we remain concerned about the price reduction in many European countries. We were also disappointed to see Gilead cut its fiscal 2010 guidance yet again at the time of reporting second quarter earnings.