West Coast Editor

Positive Phase III data with Gilead Sciences Inc.'s Viread for chronic hepatitis B virus didn't surprise Wall Street, and left analysts divided on whether marketing the compound - already prescribed off label - could threaten Hepsera further, the firm's already-cleared therapy, if approved for HBV.

"But if they ultimately get a bigger slice of a growing pie, I don't know if it really matters whether they're selling Viread or Hepsera," noted Sharon Seiler, senior analyst with Punk, Ziegel & Co. in New York, pointing out that the main driver of Gilead's stock remains the HIV franchise.

Hepsera has been losing market share to New York-based Bristol-Myers Squibb Co.'s Baraclude (entecavir), approved in March 2005, and Gilead is using Viread to shore up the HBV part of the business, she said.

The company's shares (NASDAQ:GILD) closed Thursday at $78.58, down $2.83.

In Study 102, Viread (tenofovir disoproxil fumarate), already cleared for HIV, met the primary efficacy endpoint of non-inferior to once-daily Hepsera (adefovir dipivoxil) among patients with HBeAg-negative/anti-HBe positive (presumed pre-core mutant) chronic HBV infection.

At 48 weeks, 70.8 percent of patients in the Viread arm (n=250) showed a complete response compared to 48.8 percent in the Hepsera arm (n=125; p<0.001). The most commonly observed adverse events of moderate intensity or greater were abdominal pain, back pain, headache, respiratory infections, creatinine phosphokinase and transaminase elevations, all comparable between the Viread and Hepsera arms of the study, as were grade 3 or 4 laboratory abnormalities comparable between the two arms.

The primary efficacy endpoint - proportion of patients with a complete response at week 48 - was defined by serum HBV DNA levels less than 400 copies/mL and histologic improvement, as shown by at least a 2-point reduction in the Knodell score, which measures inflamed liver, with no worsening of scarring there.

Gilead plans to submit full results for presentation at an upcoming scientific meeting, and results from a second, 48-week Phase III trial are expected later this year.

Viread's active ingredient, tenofovir DF, is the most prescribed molecule in the U.S. for combination HIV therapy, and was cleared by the FDA in the fall of 2001, with approval by European regulators early the following year.

Hepsera, a nucleotide analogue for the treatment of chronic hepatitis B, inhibits HBV DNA polymerase, and is U.S.-approved for HBV in adults with evidence of active viral replication and either evidence of persistent elevations in serum aminotransferases or histologically active disease.

Analyst Bret Holley of CIBC World Markets acknowledged in a research report that comparing drugs across trials is tough, but he wrote that Viread's efficacy looks "as good or better" than marketed HBV drugs, including Baraclude, Epivir (lamivudine, GlaxoSmithKline plc), and Tyzeka (telbivudine, Idenix Pharmaceuticals Inc.).

Holley estimated Viread for HBV could add about $200 million to Gilead's annual bottom line by 2010, if approved in the third quarter of 2008, as CIBC expects. Viread will not take much away from Hepsera, since patients who are stable on the latter drug will stay with it, and Gilead will aim for new HBV patients with Viread, in Holley's view.

Analysts at Jefferies & Co. disagreed, forecasting worldwide sales potential for Viread against HBV as high as $350 million, similar to Hepsera. The "potential superior efficacy of Viread in HBV [vs. Hepsera] and long-term safety, coupled with a 16 percent price discount vs. Hepsera, will drive its use in treatment-naive HBV patients, which may lead to a gradual cannibalization of Hepsera's market share," according to a Jefferies report, which added that Hepsera's potential for kidney toxicity limits dosing.

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