Hepatitis C is a blood-borne infection caused by the Hepatitis C virus (HCV), which targets the liver cells. The most important sequel of chronic HCV infection is progressive liver fibrosis that leads to cirrhosis, end stage liver disease (ESLD), and hepatic cellular carcinoma. An estimated 270m – 300m people worldwide are infected with HCV and close to four million of them are in the US. Unlike chronic Hepatitis B and HIV, HCV can be cured although its heterogeneous mutation capability continues to pose major challenges to researchers.

HCV drug sales are likely to explode from the current global sum of $3b to $4.3b in 2012 to $8b by 2015. Sales of the two big HCV drugs, Interferon (IFN) and PEGylated Interferon (Peg-IFN) spiked in the last decade; however, due to their efficacy limitations, these drugs are not likely to expand the market significantly. We expect the next spike in the HCV market, which calls for better therapies, to be driven by innovative oral drugs – a) Protease inhibitors (PIs) and b) Polymerase inhibitors (PMIs) – whose efficacy in IFN-refractory patients address the unmet need of HCV infected patients. Peg-IFN, in combination with ribavirin, will remain the standard of care for the next several years as novel antiviral PIs or PMIs are used together with peg-IFN in refractory patients and naïve patients.

Leaders in the field or other large pharma would like to strengthen their foothold in this therapy area. Based on the current efficacy data, we expect the leader to have the best-in-class IFN, PI or PMI.VRTX’s Telaprevir (PhIII) and MRK/SGP’s Boceprevir (PhIII) are leading the development of Protease inhibitors; however, leave room for competing agents to catch up. Both these drugs have some limitations: (i) Dose frequency: They need to be dosed three times daily and each has its respective side effects leading to a fairly high dropout rate (10%-20% in the first three months of treatment, rash and anemia concerns) and (ii) Response rate in genotype 2/3 patients is still not sufficiently validated leaving opportunity for new drugs to focus on markets where this patient type is the majority.

Polymerase inhibitors target the RNA dependent RNA polymerase, which is not present in mammalian cells. Similar to PIs, this class of compounds is also less potent in mono-therapy, but lend themselves to combination therapy due to their good resistance profile. The failure of NM283 (Idenix) pushed back introduction of the first PMI from 2009 to 2013 (if R7128 is successfully developed), two to three years behind PIs. We foresee another bump in HCV sales after the introduction of PMIs, where Roche is leading in the development of PMIs with R7128, licensed from VRUS, Virochem’s (now Vertex) VCH-222, and ANA-598.

Early data for MRK’s PI, MK7009, look promising, and with the acquisition of SGP, Merck (with SGP) could emerge as a major player in the HCV arena and challenge Roche. However, it now needs a good PMI in its HCV portfolio to command a major share in the HCV therapy area. MRK can fast track the development of its PMI, MK-3281 (PhI), or acquire/in-license a more promising PMI in clinical development. Combinations of new classes of small molecules (PMIs and PIs) are orally effective, and can significantly expand the HCV market by improving the clinical outcome of a large number of non-responders/relapsers and patients previously diagnosed but untreated due to poor prognosis. Thus, companies could strategically deploy their cash to acquire the best in class available molecule/company those addresses the needs of HCV patients.