J&J 'disappointed' U.K. watchdogs nixed Olysio-Sovaldi hep C combo. What next?

Johnson & Johnson ($JNJ) pessimists are already worried that Olysio will end up like a mayfly, with a short, happy, busy life and an all-too-sudden end. If the U.K.'s cost-effectiveness gatekeepers offer any indication, they may be correct.

The hepatitis C drug won a limited recommendation from the National Institute for Health and Care Excellence. It's for genotype 1 only, leaving genotype 4 patients out of the mix. Most hep C patients are genotype 1, so that might not seem like such a big deal. But NICE refused to back Olysio (simeprevir) in combination with Gilead Sciences' ($GILD) breakthrough treatment Sovaldi (sofosbuvir). And Sovaldi is Olysio's most promising match: an all-oral combo, no nasty interferon included.

J&J's Janssen unit responded this week by saying it's "disappointed" in the decision. "We believe there is an unmet need in [genotype 4 and interferon-intolerant patients] that simeprevir can help address," Janssen Medical Director Peter Barnes said in the statement. "[W]e will attempt to address NICE's concerns ... and hope its position will change."

It's an early consultation at NICE, so that's not out of the question. Cost-conscious payers in the U.S. have already pointed out that Sovaldi's $84,000 list price is frightening enough--but coupled with Olysio's $66,000, the cost is terrifying. Never mind that CVS Caremark's recent look at hep C drugs found that patients tolerated the Olysio combo better than older cocktails, and were much more likely to keep taking their meds.

What's terrifying for J&J, however, is the fact that new cocktails are coming down the pike, including a combo pill from Gilead that would replace Sovaldi-plus-Olysio, and older interferon-based therapies, too. AbbVie ($ABBV) and Bristol-Myers Squibb ($BMY) have their own drug combos on the way. Competition among the various cocktails could be fierce. But for Olysio, it's worse--because those companies will be pushing combos that don't include the J&J drug.

That fact worried some market-watchers when J&J reported its second-quarter earnings. Olysio booked $831 million in sales for the period, putting it on track to hit $2 billion this year, its first full year on the market. CEO Alex Gorsky wasn't shy about pointing out the danger, either; on the earnings call, he pointed out that competition was coming soon. J&J's shares dropped on the announcement.

J&J has its own plans for touting Olysio in combination with drugs from other companies. It has asked the FDA to explicitly approve the Sovaldi-plus-Olysio combo, for one thing, which would allow it to market the cocktail accordingly.

- see the NICE release

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