Karen Andersen: Following on the heels of the success of several treatments in the multibillion-dollar hepatitis C market, many drug firms under our coverage at Morningstar see another big opportunity in the liver disease space.
NASH, or nonalcoholic steatohepatitis, is part of a spectrum of nonalcoholic fatty liver disease, which can lead to liver failure and cancer. NASH has no effective treatment, but has a growing pipeline of potential treatments approaching the market. We think the global market for NASH will be worth US$12 billion within 10 years, taking the potential for some clinical trial failures into account, and almost US$26 billion assuming all advanced drug candidates reach the market.
The two most promising methods for investing in the NASH opportunity, in our opinion, are wide-moat Gilead and no-moat Intercept. Both firms are undervalued, and each is poised to see more than US$2 billion in peak annual NASH sales.
With Gilead, investors gain access to a more diversified portfolio of HIV, hepatitis, and oncology therapies, but also the largest and most advanced NASH pipeline in the industry. Gilead's selonsertib should have pivotal data in the first half of 2019, and combination regimens should have midstage data by the end of 2019.
With Intercept, virtually all of the firm's value is tied up in obetocholic acid, which is approved to treat other rare liver diseases but should have pivotal data in NASH in the first half of 2019. Intercept's drug has leading efficacy, and while shares don't appear to incorporate the full value of obeticholic acid, we do think that the drug's side effects leave room for improvement in the long run.
Among big pharma names, we also see Bristol and Pfizer as holding potential in NASH, based on their early stage pipelines, but commercial sales are several years down the road.
