As Merck cans another hepatitis C project, can leader Gilead capitalize?

These days, hep C isn’t looking like the cash cow market it once was, prompting some of those trailing behind leader Gilead to bail on their development programs. But how much will those rivals’ moves actually help the struggling drugmaker?

Friday, Merck became the latest to scrap some candidate regimens, nixing development of MK-3682C, a doublet regimen pairing uprifosbuvir with NS5A blocker ruzasvir, and triplet MK-3682B, which adds NS3/4A protease inhibitor grazoprevir—one of the components in Merck's two-drug Zepatier—to the mix.

"This decision was made based on a review of available phase 2 efficacy data and in consideration of the evolving marketplace and the growing number of treatment options available for patients with chronic HCV infection," the company said in a statement.

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The move follows a similar decision from Johnson & Johnson’s Janssen earlier this month, and it comes as no surprise after a February note from Leerink Partners analysts indicated Merck was facing heightened demands from regulators. According to the analysts, the FDA told the pharma giant it would have to "complete separate trials, and show an added benefit" with the triplet over the doublet. And with the doublet only in phase 2, that request delayed "the timing of the triple materially," they wrote, suggesting hep C heavyweights Gilead and AbbVie would steal the show between 2018 and 2021.

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But that’s not to say Gilead, which was first on the scene with wonder drug Sovaldi and, later, combo therapy Harvoni, has had an easy time in the hep C market lately. Nothing shows the toll competition and payer discounting have taken better than the big biotech’s top line, which has showcased freefalling sales over the last couple of years.

And while "the HCV business is not generally as steep declining as it was a year ago (treated patient volumes has flattened out recently) ... we do think, as do many, that the HCV biz quarterly results are likely to remain murky for the next few quarters," Jefferies analyst Michael Yee wrote to clients Thursday.

One reason? A key competitor that isn’t going to go away: AbbVie’s Mavyret. The pan-genotypic product, approved in August, significantly undercuts Gilead’s Epclusa, and it bears a shorter duration of therapy, too. "We think consensus is for around 10% to 15% share loss and 10% price, hence 20% to 25% decline," Yee wrote.

RELATED: AbbVie's new pan-genotypic hepatitis C drug Mavyret deeply underprices the competition

And the hep C giant may have to follow suit in the price department if it wants to stay competitive. "If it’s not share loss, then a price reduction has to get GILD on parity to ABBV," Yee wrote, noting that if Gilead doesn’t make a change, Mavyret’s "~50% overall cheaper price point per patient" could cause it pain on payer formularies. "Harvoni also may have to see additional rebating to get down" toward AbbVie’s overall price-per-patient, too.

The good news for Gilead? Wall Street isn’t expecting much from its hep C franchise going forward. All eyes are on the oncology space, where Gilead recently pledged to shell out $11.9 billion for Kite Pharma. "A strong cancer launch in 2018 could improve sentiment and the known issues around HCV," Yee noted.