UPDATED: Gilead picks up blockbuster FDA blood cancer approvals for idelalisib

You can score another blockbuster approval for Gilead ($GILD). The big biotech said today that the FDA has approved its PI3k inhibitor idelalisib for three types of B-cell blood cancers following its early Phase III success last fall on impressive leukemia data. EvaluatePharma analysts estimate this drug could earn $1.2 billion a year by 2020, making it one of the top therapies in late-stage development.

The company says it plans to market the drug as Zydelig for chronic lymphocytic leukemia, relapsed follicular B-cell non-Hodgkin lymphoma and small lymphocytic lymphoma. The regulatory OK adds to a lineup of therapies that has been driving Gilead's bottom-line numbers north while commanding a controversial price for its hep C standout Sovaldi.

In late-stage data, idelalisib paired with Rituxan scored a 93% progression-free survival rate at 24 weeks, roughly double the results for Roche's old drug alone. The drug's overall response rate came in at 81%, easily besting Rituxan's 13% and making clear why Gilead's data monitoring committee gave it the go-ahead to end its CLL study early. Those data set up idelalisib for a head-to-head showdown with Johnson & Johnson ($JNJ) and Pharmacyclics' ($PCYC) Imbruvica.

But a black-box warning on the drug's label could stand in its way. Zydelig has been linked to fatal and serious toxicities of the liver, according to the FDA, and its packaging spells out risks of severe diarrhea, colitis, pneumonitis and intestinal perforation. Whether that'll seriously affect its market potential remains to be seen, but investors are taking the warning seriously: Gilead's shares stayed about flat on the announcement, but Pharmacyclics' shot up more than 10% on Wednesday morning.

Bernstein's Geoff Porges quickly scanned the lower-than-expected wholesale cost Gilead plans to charge for Zydelig and concluded that the company is likely to hit $1.5 billion in annual sales by 2017.

"Zydelig's monthly price will be $7200 (WAC), which is lower than the comparable price for PCYC's Imbruvica in CLL ($8200)," Porges wrote in a note to investors. "This is also lower than the price for other relatively recently approved hematological cancer kinase inhibitor medications, such as Ariad's Iclusig ($10,350/month). Our model had been based on pricing in the $8400 range, and this suggests lower revenue potential than we forecast, given the lack of material variability in demand depending on price. Gilead's pricing decision appears to reflect their recognition that in most indications Zydelig will be co-administered with other medications (Rituxan for example), pushing the monthly treatment cost of $12,000/month for the combination." 

Gilead's drug, picked up in the company's $600 million buyout deal for Calistoga, works by blocking overactive PI3K-delta signaling, cutting off a key contributor to cancer growth in B-cell leukemias and lymphomas. Idelalisib, like Imbruvica and Roche's ($RHHBY) Gazyva, won the FDA's breakthrough designation.

More than 200,000 patients in the U.S. suffer from these three blood cancers. 

Gilead built its reputation--and a very thick skin when it comes to criticism of any kind--on its portfolio of AIDS drugs. This is its first approval in cancer, which presents a new opportunity to diversify its product base.

More competition for CLL may also be on the horizon, though. AbbVie's ($ABBV) experimental leukemia drug ABT-199 is continuing to wow analysts with some stellar early-stage data. At the interim point of a Phase Ib study, ABT-199/GDC-0199 combined with rituximab registered an 84% overall response rate among patients with chronic lymphocytic leukemia.

Georgetown University's Bruce Cheson

"Zydelig is a much needed new treatment option for appropriate patients with CLL and these indolent lymphomas who have experienced relapses and have limited, if any, treatment options," said Bruce Cheson, a professor at Georgetown University and a principal investigator on the Zydelig pivotal Phase III trial in CLL. "In clinical studies among patients with relapsed CLL, FL and SLL, Zydelig produced strong responses, including a significant improvement in progression-free survival in CLL. I believe it helps fill a significant unmet need for these patients."

- here's the release
- read the FDA's statement