J&J's new hep C med Olysio aced Q2. So why are investors worried?

Imagine this: A brand-new drug surges onto the market. Within 6 months, it surges right past the blockbuster barrier. It surges so much that it helps boost your company's pharma sales by more than 21%.

Cause for celebration among stockholders? If you're Johnson & Johnson ($JNJ) and the drug is new hepatitis C treatment Olysio, not so much.

After J&J unveiled street-beating Q2 results yesterday, fueled in part by Olysio's $831 million in sales for the quarter, its stock price actually dropped. Investors figure Olysio's money-minting capabilities won't last, not with competitors racing toward launch themselves.

It's just the latest twist in the hepatitis C world, where Gilead Sciences' ($GILD) $84,000-per-treatment-course Sovaldi has become the fastest drug launch ever. And that's despite much hand-wringing and arm-twisting by pharmacy benefits managers and other payers.

Those payers aren't just worried about Sovaldi's price, though. They're worried about the price of a follow-up product from Gilead: a combo pill that puts Sovaldi's active ingredient, sofosbuvir, in tandem with GS-5816, a NS5A inhibitor that would kick Olysio right out of the Sovaldi treatment cocktail.

Other hep C meds are on their way, too, from AbbVie ($ABBV), Merck ($MRK) and Bristol-Myers Squibb ($BMY). All of them will be vying for patients, millions of them in the U.S. Payers are hoping that the competition will drive prices down, but some analysts think Gilead's combo pill will be strong enough--and as a single tablet, convenient enough--to dominate the market.

So, what about Olysio, which, as a protease inhibitor, isn't among the cutting-edge "nuc" meds other companies are working on? J&J aims to show that it has a place in the treatment cocktails, regardless of a proliferation of rivals. In fact, the company recently asked the FDA to approve Olysio for a new use--in combination with Sovaldi.

No sure thing, obviously, and investors appear to have realized that, Piper Jaffray analyst Matt Miksic told Bloomberg. "There may not have been as many folks dialing in the pressure on the back half of next year from competition," he said. "That's certainly something that was driven home."

- read the Bloomberg story

Read more on