Bank Of America Reviews Gilead Earnings

In a report published Friday, BofA Merrill Lynch analysts maintained an Underperform rating on

, with a price objective of $94. At the EASL meeting last week,

reported results from the Phase III C-EDGE program, which examined the grazoprevir/elbasvir fixed dose combination in patients with genotype 1, 4, or 6 HCV infection. "In treatment naïve patients, although the 95% cure rate (SVR12) appears to meet the threshold for efficacy at first glance, MRK's subgroup analyses suggest that efficacy is actually less robust than GILD's Harvoni," the analysts said. In the report BofA Merrill Lynch noted: MRK enrolled a lower proportion of the more difficult-to-treat GT1a patients (50%, vs. 67-80% in GILD's ION-1 and -3 trials) and patients with baseline viral load higher than 800,000 IU/ml (70%, vs. 79-84% in ION-1 and -3), translating to a less stringent test of efficacy. MRK's cure rate in GT1a patients was less impressive (92%) than GILD (99% and 93-95% in ION-1 and ION-3). Efficacy was especially poor in patients with baseline GT1a NS5A RAVs (resistance associated variants), suggesting limited elbasvir activity in the presence of NS5A RAVs. "We believe a nucleotide inhibitor such as Sovaldi is likely necessary for suppressing these RAVs," the report added. The analysts commented, "Even though these C-EDGE results suggest that GILD has the superior regimen, we believe MRK could still gain meaningful share next year with an aggressive pricing strategy. Given the drawbacks to MRK's regimen in specific patient subgroups, we believe the need to offer a substantial discount would be even greater. As a result, we envision another step-down in price as the three major players fight for market share and exclusive deals with payers."