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Market Exclusive Weekly Biotech Report Covering Gilead Sciences, Inc. (NASDAQ:GILD) and Celyad SA (ADR) (NASDAQ:CYAD)

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Market Exclusive exclusive biotech report

For the section of our report detailing events in biotech this past couple of weeks, we’ve got two focus companies – one big, one small. They are Gilead Sciences, Inc. (NASDAQ:GILD) and Celyad SA (ADR) (NASDAQ:CYAD).

Gilead Sciences

On June 28, the FDA approved SOF/VEL under the brand name Epclusa for the treatment of all genotypes of chronic hepatitis C virus (HCV).

The Science

This one’s a big one for a few reasons, and one of them is actually the science and its implications for the drug’s potential. Epclusa is a combination of two different compounds. The first is the already approved Gilead Sciences, Inc. (NASDAQ:GILD) blockbuster Sovaldi, and the other, an antiviral drug called Velpatasvir. The latter is part of a family of drugs called NS5A inhibitors. These types of inhibitors stop HCV from replicating by inhibiting a protein called NS5A, which is responsible for transcribing viral genes in replication. The drugs that are available in this field prior to this approval target certain genotypes of HCV. There are six, and each drug targets one or more but not all of these genotypes.

By combining Sovaldi, which before this approval was actively used in combination with a couple of other compounds to target genotype 2 and 3, or 1 and 4, depending on the combination, with Velpatasvir, Gilead is able to target all genotypes 1-6 effectively.

The Market

The reason it is so important to be able to target all genotypes is that the current treatment process involves the use of a test to determine which type of HCV the patient in question carried. This test costs money obviously, and in certain regions, is very difficult and prohibitively expensive to get hold of. The availability of a drug that targets all genotypes means this test is no longer needed before treatment, and in turn, practically opens up the entire hepatitis C market to Gilead – a market that has classically been pretty fractured by nature of the various genotypes involved. The way we expect Gilead to market this one, however, focuses on genotypes 2-3 in nations that can and are happy to pay for the pre-treatment test. Its 1, 4 and 6 drug, Harvoni, will likely still dominate the developed market.

Gilead generates $10 billion annually from Sovaldi, and a little over $3 billion a quarter from Harvoni. Expectations are that the market for Epclusa will mimic that of Sovaldi initially and then expand based on its presence in international markets and the benefit for the full sweep treatment it offers.

Market Reaction

Markets had pretty much priced this one in already, as there were high expectations for an approval based on the great data the company used to underwrite its NDA. Nonetheless, expect a little kick throughout the latter half of the week, as mainstream news media filters the story out to the less plugged-in investment community. They say sell the fact, but that’s not our advice here. Gilead has had a tough few months, down nearly 20% on its April highs, and this could easily be the driving factor behind a longer term reversal and an upswing towards a minimum target of the April price of $102.



Also on June 28, Celyad SA (ADR) (NASDAQ:CYAD) announced the results from a European Phase III trial of its lead cardiovascular drug, C-CURE. Alongside the data, the company announced the drug had unfortunately missed its primary endpoint.

The Science

This one is a stem cell candidate – a space that has grown pretty steadily over the past five years, but as regulatory pressures ease, should speed up across the next ten years. Unfortunately for Celyad, it looks as though its C-CURE drug won’t be the candidate that it carries forward into the next decade. The drug targets heart failure, and the science behind its MOA isn’t all that complicated. Essentially, Celyad removes some of the patient’s bone marrow cells and mixes them with a combination of cytokines and growth factors. The mixture is then introduced by injection directly into the heart, and left to grow. The two factors work on the bone marrow cells to effectively convert them to heart cells, and the treatment as a whole is designed to strengthen the ability of heart cells to repair and reproduce naturally.

The Data

The primary endpoint of the trial was a composite of a number of different data points, including mortality, morbidity, quality of life, the Six Minute Walk Test, and left ventricular structure and function at nine-months post-procedure. The patient population totaled 271 patients across 12 countries in Europe and Israel. While the company reported a positive trend, there wasn’t a statistically significant improvement in these composite of factors between the active arm and placebo.

Essentially, the treatment seemed to have some positive impact on patients, but not any level of impact that can be considered worthy of an NDA submission as things stand. There was one subgroup of patients, however, that demonstrated just such an improvement, and Celyad is going to be focusing on this group and regroup. This group includes those categorized by a particular baseline of what’s called the End Diastolic Volume (EDV) at inclusion.

The Market

The market for a treatment like this is potentially huge, with cardiovascular disease being so prevalent across all global regions and demographics. In the US alone, around 600,000 people die of heart disease, and 735,000 people have heart attacks annually. Analysts put the 2015 market valuation at $140 billion, and expect this to grow at a CAGR of circa 2% going forward across the next 5 years.

Market Reaction and Trading Strategy

Celyad is down more than 40% on the data, and this isn’t really that surprising. There’s a chance that this fall could increase beyond these levels as trading picks up towards the end of the week. Markets are very much risk off at the moment, and the chances of an investor putting in a bid for a development stage biotech with what is essentially a failed lead candidate are slim. There might be an opportunity, however, to take advantage of the pullback longer term. As we mentioned a little earlier, the treatment met its endpoint in a subset of patients, and Celyad management has stated it intends to use this data to set up a second Phase III, this time in the US, in the same indication.

The assumption here is that the company will set out using the subset as a primary endpoint ahead of the ones used in the European trial, and as such, may yield some improved results when topline hits. It’s speculative, but far from impossible. Investors interested in bottom picking can afford to wait on this one until the Phase III takes shape. The company still has plenty of money so there is room financially for another Phase III.

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