HIV drug market mutates

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NEW YORK (CNNMoney.com) -- The market for treatment of human immunodeficiency virus, or HIV, is mutating as rapidly as the virus itself, and drug industry heavyweight GlaxoSmithKline could find its lead position in jeopardy.

The $8 billion drug market for HIV will shift dramatically as it expands by nearly 50 percent through 2016, according to analyst Mansi Shah from the research firm Datamonitor. More than two-thirds of the current crop of HIV drug patents will expire in the next decade, said Shah.

"The biggest casualty in this evolution will be GlaxoSmithKline (Charts), which will see its long reign as the undisputed king of the HIV treatment market come to an end, as its aging portfolio of HIV drugs gradually lose their patent protection," said Shah, in her report, released in October.

Shah said biotech developer Gilead Sciences Inc. (Charts) and the pharmaceutical company Bristol-Myers Squibb (Charts, Fortune 500) have emerged as Glaxo's key challengers.

"I think GlaxoSmithKline has already lost the battle," said Jason Zhang, analyst for BMO Capital Markets. "Gilead drugs already account for more than 55 percent of patients treated [for prescription volume.]"

Glaxo spokesman Mark Meachem declined to comment. Gilead officials were not immediately available for comment.

Gilead's products are also overtaking Glaxo in terms of sales, despite the fact that Glaxo has no less than eight drugs in its HIV franchise.

Glaxo's HIV sales totaled $2.2 billion during the first nine months of 2007, slipping 1 percent from the year before. But sales for Glaxo's flagship HIV drug Combivir dropped 10 percent in the first nine months to about $700 million.

Meanwhile, the sales for Gilead's HIV drug franchise grew by nearly half during the first nine months of 2007, to about $2.3 billion, just barely eclipsing Glaxo sales. During that time, Gilead's stock surged 26 percent.

Phil Nadeau, analyst for Cowen & Co., expects Gilead's HIV annual sales to reach $3.1 billion in 2007, and to keep climbing to $6.4 billion in 2012.

The most dynamic product behind the market shake-up is the drug Atripla, a combination pill of Bristol's Sustiva and Gilead's Emtriva and Viread launched last year.

HIV treatment regimens were once notorious for their complex daily juggling of drug cocktails, fueling a need for simplified combination drugs. Atripla is popular because it's taken once a day and is effective, according to Les Funtleyder, analyst for Miller Tabak.

Atripla sales reached nearly $650 million in the first nine months of 2007, almost ten times its sales from the year-ago period.

"HIV [treatment] is all about combination," said Zhang of BMO, who projects that Atripla's annual sales will grow to $2.7 billion by 2010, eventually peaking at close to $4 billion.

Another drug combo, Truvada, has also contributed to Gilead's success. Sales for the drug exceeded $1.1 billion in the first nine months of 2007, up from $850 million during the same period last year.

Zhang of BMO believes that sales for Truvada, itself a combination of Emtriva and Viread, will peak at $1.6 billion in 2007.

But even Gilead might have to look over its shoulder. Analysts say the next big participant in the market could be a combination of Prezista, released last year by Johnson & Johnson's (Charts, Fortune 500) subsidiary Tibotec, and Merck & Co. Inc.'s (Charts, Fortune 500) Isentress, which entered the market in October.

However, Tibotec spokeswoman Pam Van Houten and Merck spokeswoman Amy Rose said their companies have no plans for such a collaboration.

Both companies say they're focused on getting their drugs approved by the Food and Drug Administration for patients who have not been treated before. Isentress and Prezista are currently approved only for patients who tried other types of treatment first.

Tibotec is also awaiting the FDA's decision on an experimental AIDS drug called TMC125. The decision could come as early as January, Van Houten said. Tibotec is also starting late-stage testing for another experimental AIDS drug, TMC278.

Also, Pfizer Inc.'s (Charts, Fortune 500) Selzentry was approved by the FDA in August, bringing another HIV anti-viral to the market.

The HIV drugs help patients live longer, and most of them work by suppressing the virus.

"A lot of people are interested in new combinations and new approaches to HIV, and a lot of that has to do with the fact that it's a quickly mutating virus," said Funtleyder of Miller Tabak. "The more new therapies, the better."

The list of experimental AIDS products goes on and on, though not all of the news is good.

Merck, the most advanced researcher in search of an elusive AIDS vaccine, said in September that it was discontinuing its study because the vaccine failed to protect participants. A greater number of HIV infections occurred in the vaccinated group than among the placebo patients, said Merck.

"Right now, all the work we're doing is trying to understand why the vaccine was ineffective and why the increase in the vaccinated group was observed," said Merck spokeswoman Mary Elizabeth Blake. "It's very unclear as to why this happened."

The failure of the Merck's study sent shock waves through the vaccine industry. Dr. Peter Paradiso, vice president of scientific affairs in Wyeth's (Charts, Fortune 500) vaccine division, said his company has stopped its AIDS vaccine research for the time being.

But the drug pipeline is still cooking. Schering-Plough (Charts, Fortune 500) has an HIV drug in late-stage experiments, while Panacos Pharmaceutics Inc., (Charts) Gilead and Genentech (Charts)-owned Tanox have drugs in earlier stages of development, according to Mansi of Datamonitor.

Not only is the market shifting, but the virus and the way it's treated has changed as well. AIDS kills by breaking down the immune system. But AIDS is no longer considered a death sentence for those who get the proper treatment, because many patients survive for decades.

From a market perspective, this means that drug companies can sell their products to patients for many years. Also, long-term patients develop resistance treatment over time, so the demand for new drugs is particularly strong.

"HIV patients live much longer," said Zhang of BMO. "They have the disease for life, and that's why the market is growing."