'Is Curing Patients A Sustainable Business Model?'

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Goldman Sachs analysts attempted to address a sensitive topic for biotech companies, particularly those involved in pioneering “gene therapy” treatments: Treatments could be bad for business in the long run.

“Is treating patients a sustainable business model?”. the analysts asked in an April 10 report titled “The Genome Revolution.”

“The ability to deliver a ‘one-shot cure’ is one of the most attractive aspects of gene therapy, genetically engineered cell therapy and gene editing. However, such treatments offer a very different approach with respect to recurring revenue versus older therapies,” analyst Salvin Richter wrote in a note to clients Tuesday. “While this proposal holds tremendous value for patients and society, it may represent a challenge for genomic drug developers looking for sustained cash flow.”

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Richter cited Gilead Sciences’ Treatment for hepatitis C, which achieved a cure rate of more than 90 percent. The company’s U.S. sales for these hepatitis C treatments reached $12.5 billion in 2015, but have been declining since then. Goldman estimates U.S. sales of these treatments will be less than $4 billion this year, according to a table in the report.

“GILD is a case in point where the success of the hepatitis C franchise has gradually depleted the available pool of treatable patients,” the analyst wrote. “In the case of infectious diseases such as hepatitis C, curing existing patients also reduces the number of carriers capable of transmitting the virus to new patients, thus also reducing the incidence pool…Where an incidence pool remains stable (for example, in cancer) the possibility of a cure poses less risk to the sustainability of a franchise.”

The analyst did not immediately respond to a request for comment.

The report suggested three possible solutions for biotech firms:

“Solution 1: Address larger markets: Hemophilia is a $9-10 billion WW market (hemophilia A, B), growing at ~6-7% annually.”

“Solution 2: Solutions for high-incidence disorders: Spinal muscular atrophy (SMA) affects cells (neurons) in the spinal cord, affecting the ability to walk, eat, or breathe.”

“Solution 3: Continued innovation and portfolio expansion: There are hundreds of inherited retinal diseases (genetic forms of blindness) … The pace of innovation will also play a role as future programs may compensate for the declining revenue trajectory of prior assets.”