I prefer Abbvie's approach to HepC - they are just slightly behind GILD with the timing of their all-oral regimen, and whereas GILD hides the true efficacy of their drugs by continuing to report only SVR4 data, ABBV like VRTX provides SVR12 and SVR24 data.
That VRTX will capture only a small portion of the HepC market going forward is already factored into share price. The dominance in CF, coupled with their continuing presence in HepC and promising pipeline in arthritis and influenza should make VRTX one of the best long-term plays in the biotech sector.
The assumption that VRTX will only capture a fraction is nonsense. VX-135 and GS-7997 are very similar. This is going to come down to a price war. Gilead is 11 billion in the hole on GS-7997. How much is VRTX spending the rights for VX-135? The point is, VRTX can afford a lower price target.
The more realistic outcome is that both GILD and ABBV compete hard and heavy, for about 12 to 18 months. In that time, GILD will be looking to recoup as much of its sunk costs as possible. And then VRTX comes in with a competitive price tag and the price war is on. With the cash flow from the CF franchise, VRTX will be able to fund the upfront marketing costs and be a very serious competitor.
And then, all of the HCV players will yet again have another drug development to contend with 12 to 24 months after that. So GILD has no choice but to hit this hard and heavy. And from a price standpoint, that gives VRTX the advantage.