The Same Is Good Enough, for Now

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The same is sometimes good enough. That is until the current treatment goes generic.

Gilead Sciences (NAS: GILD) announced results for the first phase 3 trial testing its Quad HIV pill against Atripla today. The Quad performed a little better than Atripla in the primary endpoint: 88% of patients taking the Quad had very little virus in their blood after 48 weeks, compared with 84% taking Atripla. But the difference was only good enough to prove that the Quad was non-inferior to Atripla. In an alternative measure of efficacy, the Quad was able to improve the amount of CD4 immune cells more than Atripla by a statistically significant amount.

Assuming the second phase 3 trial scheduled to be released later this quarter comes out positive, Gilead plans to apply for Food and Drug Administration approval early next year.

The Quad only needs to be as good as Atripla because Gilead owns all four of the drugs in the combination pill. It has to share revenue for Atripla with Bristol-Myers Squibb (NYS: BMY) , which contributed one of the drugs. Even if they're priced the same, the economics for the Quad should be better than Atripla or its newly approved Complera, where it has to share revenue with Johnson & Johnson (NYS: JNJ) .

With data as good as Atripla, competing with other regimens -- from Pfizer (NYS: PFE) and GlaxoSmithKline's (NYS: GSK) ViiV Healthcare, for instance -- shouldn't be that hard. Atripla had sales of over $1.5 billion in just the first half of this year. Whether Gilead will be able to compete with Atripla will depend partially on the side-effect profile of the Quad -- which we'll have to wait to see at a medical meeting -- and partially on Gilead's marketing muscle.

Further down the line, when Atripla patents begin to expire in 2017, Gilead will probably have a harder time selling the Quad without a superiority claim. For now, though, investors can hang their hats on improved margins.

You can keep track of Gilead as it tries to gain FDA approval for the Quad by adding it The Fool's free My Watchlist service. Start keeping track of all our Foolish analysis on Gilead.

At the time this article was published Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson and GlaxoSmithKline. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson, GlaxoSmithKline, Pfizer, and Gilead Sciences and creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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