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I think the worse case scenario starts with Teva approval, and then gets a bit worse with a Sanofi AG entering the market, thereby splitting the market 3 ways.
Either way, however, as Dew has also mentioned, long-term, if Teva is approved it devalues the proprietary tools that MNTA holds as other companies can then achieve the same ends without them.
MNTA's valuation, regardless of Lovenox soars if MNTA's proprietary tools and methodologies are required to characterize a molecule to the satisfaction of the FDA. Some other company may create its own in the future, but as of now, if Teva is not up to snuff, no company with a pending ANDA will have such capability.
My valuation range is therefore $15-$20. I see that Canaccord/Adams puts its dual generic scenario with Teva (but no mention of an AG) at $11.28 back in Nov '09 (assuming 85% probability of approval. Changing that 85% to 100% you get $13.27 present value for M-Enoxaparin in the dual generic. However, that is a conservative evaluation, which assumes $600 million peak sales on 12% royalties. They model $10 mil in '10, $30 in '11, $60 in '12, and $75 in '13.
The give M356 + M118 a similar value to what Dew derived (Dew derived $6 plus he included the rest of the IP) and give it $4.44 and $1.29 respectively for a total of $5.73. They did not toss in any cash.
On this basis, excluding cash, they give MNTA a 100% chance of M-Enoxaparin NPV of $13.27 for M-Enox + $5.73 the rest = $19/share.
They gave M356 a 40% chance of success, but with M-enoxaparin, one would think this 40% chance would also need to be upgraded. They also modeled no revs from M356 until 2015.
In addition, they list M356 as a 15% royalty. But since M356 is a more complex molecule, it is more likely to be a sole generic and therefore a 50/50 split, and not a royalty model.
In any case, the "in addition" and the "also" can go on for quite a bit, but given these modeling choices, the $19 a share for the total company appears to be a conservative estimation.
The $13.73 for M-Enox is already exceeded as MNTA got sole approval and will receive revenues much quicker than modeled.
Long and short, it appears that analyst models are putting the dual generic M-Enox scenario (excluding all else) at around $13-$15, and the entire company, in this dual scenario, excluding cash in the $18-$20 range, at least back in late '09. This would be around worse case valuation I think.
Anyone else have a go at it?
Tinker
This is the part of the transcript that most interested me:
<<<Owen Gibbs – Rabbass
I just want to clarify that you believe that you would have not got approval for your generic enoxparain on the basis that you’ve are going to be able characterize say, 80% as opposed to 100% of Lovenox.
Craig Wheeler
Well, I think that is our definite belief. And I think if you look at those approach that the FDA is taking, where they are actually requiring validation because they are looking at overlapping and I thought of a message. If you only had 80% when you started using overlapping methods you would actually show differences. So you really do need to actually have the complete and thorough characterization to be able to meet the criteria you're looking across difference dimensions.>>>
And of course Sanofi said it was not possible to characterize the molecule sufficient to reproduce it, but given that I have not heard anything from Wheeler to convince me that he is not a straight-shooter, and this is a comment that he really means, from what I have garnered over the past year or two, which is probably nothing more than the conclusion that most on this board have reached as well, is that Teva has not characterized the molecule, and at best perhaps 80% of it. I draw this conclusion because Teva keeps emphasizing that it has identified the key components. Teva never states that it has fully characterized the molecule or created its fully characterized equivalence.
Teva talks in terms of historic generic formulations, and not in terms that MNTA speaks of that involve complete characterization.
If this holds...well, it is a good thing for shareholders lets just say (with understatment).
Tinker
btw/ There has been some inquiry of valuation ranges. Dew and others have put forward very good upside valuation ranges, particularly on a single generic approval. I've run the numbers on multiple scenarios and surprisingly I have found that the Deutsche Bank numbers posted in message #100269 were almost identical to the numbers I derived independently.
$15-$20 Teva and MNTA generic approved, $64 single generic, I did not calculate the branded generic along side sole generic as that scenario presently does not seem likely.
On the low range, take $18 as the median (with plenty of future upside possible with Copaxone, M118, FoB, etc., that would be less than a 20% downside from here (ignoring the small, but still possible result of a catastrophic court ruling).
Anyways, those are my thoughts on the primary issues that I think concern most of us presently with MNTA shares.
Look forward to Dew's numbers and thoughts as well as others.
Dew,
You are correct. I hit the wrong cell when calculating the 50% marketshare. I get $103 million in revenues with the 50/50 scenario.
Reducing it by 2% andthe range is from $101 to $132.
So there is some downside risk here. Probably to $15-$20 a share if Teva is approved, along with the overall disappointment that Teva can equal MNTA in a commercial sense the development of a complex directly substitutable molecule.
It seems to be an issue if Teva can get their drug approved to be directly substitutable when it will clearly not be the same as Lovenox or MNTA/NVS's drug, yet all treated the same.
Anyways, that is my range of worse case scenarios if Teva is given the same clearance that MNTA received.
As for the lawsuit, they have found one statutory straw to grasp at. We will need to see the briefs on the issue.
Tinker
Value of MNTA if Teva approved
Just running some numbers. If Teva is approved, utilizing a 12% royalty rate on revenues, if the market is split 50/50 between the two companies (with 80% of the market going generic) using a 20% price discount to branded drug I get revenues to MNTA of: ~$67 million, which I consider to be a low side estimate.
On the top end, assuming the same as above but MNTA/NVS garner a 65% marketshare for their generic (again with the generic market being 80% of the total, with a 20% price discount to the branded drug) I calculate revenues to MNTA of ~$134 million.
On the bottom end this share price will not hold, on the top end, I think the present share price can be justified, even if Teva does gain approval as it would be ~7.46 x revenues, which would be justified given the rest of the company and its potential.
Has anyone else run these numbers? If so, what do you guys come up with on this scenario. We've run a lot of the best case scenarios, and those prices are multiples higher than present valaution. What about the downside if Teva gets approved? (I am discounting the lawsuit as mostly bunk so not incorporating that into the numbers).
Tinker
RockRat,
I have not, but I will by this weekend. Thanks for the link.
I hope your opinion of the rigidity of the entire document is true, as I do not believe that Teva would meet the first 3 of the 5 requirements cited from Dew's link on that basis. However, the longer and more detailed a rule making document, the more ambiguity will be found by a well funded law firm looking for the same.
Any of the rules specified also have to meet the enabling legislation and the purpose of the rule making to begin with.
What I think Teva is doing is stating that many of these rules are extraneous and not necessary, and that Teva has met all reasonable and necessary requirements, and having done so, their application must fit within the criteria created, and if not, the criteria needs to bend.
As a lawyer, I can put the FDA on the stand and ask them why "X" really matters when Teva has met "Y". The FDA will need to articulate reasonably why this is so. They don't have to be right, but they have to be rational about it.
Thanks for the link and RockRat and the indepth analysis you have presented us. I'll go through the long version this weekend.
Tinker
RockRat,
There is no black and white when it comes to rules. Even thou shall not kill, except in self-defense, to avert a worse disaster, or to kill infidels...
I think what Teva is doing is arguing with the FDA as to what the rules really mean, and why their results really do "functionally" and "practically" meet these criteria.
As we all know "equivalent" does not mean what it says, anymore then does the Clayton Act that states "there shall be no restraint of trade" (paraphrased but pretty close). Really, that would make all contracts an anti-trust violation because each contract restrains trade, and excludes others.
So Teva can make this argument based upon how they want the FDA to interpret their rules in relations to Teva's submission, and the FDA may never agree with them.
I think actually that it is in Teva's best interest for the FDA to remain as rigid as possible, and keep the barriers to approval as high as possible, in order to protect Copaxone which is also seeking approval through the ANDA process. But, as we've seen, they will argue for more flexibility on Lovenox and less on the impossible to characterize Copaxone (according to Teva).
Was Sanofi "lying" when they said it was impossible to characterize Lovenox? Given their patent application on Lovenox, perhaps, but probably not.
Tinker
http://www.nature.com/news/2007/190907/full/449274a.html
An older article that many of us reviewed back in '07
Venkataraman says that Sanofi-Aventis declared it impossible to determine more than 70% of the carbohydrate composition of Lovenox. “We can account for every species in that mixture,”
Now of course Teva says the same thing, that they cannot even account for what is in Copaxone.
Roll them over one at a time. Always promising to know that the impossible was made possible.
Tinker
http://www.allbusiness.com/legal/trial-procedure-restraining-orders/14662649-1.html
That petition was denied. The company cited other aspects of the APA and due process violations. They alleged a danger to the public.
Intersting, on an issue raised here about reputation: "Biovail failed to present evidence that generic Wellbutrin will actually cause harmful health effects and, therefore, failed to prove the negative impact that an increase in the number of drug-induced seizures would have on its reputation."
I have no idea how Sanofi could prove that MNTA's drug is anymore dangerous than brand name Lovenox since it is darn near identical and there were no clinical trials. In the Biovail case they alleged harmful chemicals in some batches. No such issue will exist in our case.
The court concluded as follows: "The district court then went on to reject Biovail's assertion that no other interested parties would be harmed by the requested injunctive relief. When a generic drug is approved, the generic drug manufacturer is usually prepared to immediately fill its distribution pipeline with the approved product. Therefore, would-be manufacturers of generic Wellbutrin could be harmed by the TRO.
The district court then found that Biovail failed to establish or even allege that any of the applications awaiting FDA review represent a drug that is in fact unsafe, and thus, the public interest is not best served by delaying the marketing of the generic drugs at issue."
All in all, I am much more concerned about a Teva approval than I am this lawsuit.
Tinker
<<<In my opinion, the FDA made a mistake with the Momenta approval>>>
The guy ought to run for office, as only a politician or snake oil salesman can talk out of this many sides of their mouth. If the FDA made a mistake with the Momenta approval then you have to ask WHY THE HECK DID YOU EVEN FILE AN EVEN LESS APPROVABLE aNDA with the FDA to begin with?
Would the FDA have made a mistake if they instead approved your Lovenox generic that is less fully characterized than MNTA's?
He then makes no comment at all as to the prospects for approval of their aNDA.
Now I wonder, if Teva's generic Lovenox is approved, will he still call it a mistake by the FDA? Why not just remove his aNDA now as he admits approving it would be a mistake.
Aye carumba!
Tinker
Here is the narrow and difficult legal standard that Sanofi has to overcome to meet its burden. Good luck, as this is not some ill thought out, put your finger to the wind, out of the blue, make it up as you go decision. The FDA's thoroughness in this decision impressed even me. This said, good attorney's can nit pick anything. However, Sanofi has to first show that it is likely to prevail before it can even get a temporary restraining order. The standard is as follows:
<<<FDA decisions about adulteration and regulation are reviewed under the APA, which states that an agency's decision should not be overturned unless it was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). We have defined the arbitrary and capricious standard as follows:
A decision is arbitrary and capricious if the agency “has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or product of agency expertise.”
O'Keeffe's, Inc. v. U.S. Consumer Prod. Safety Comm'n, 92 F.3d 940, 942 (9th Cir.1996) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). Most importantly, “[r]eview under the arbitrary and capricious standard is narrow, and the reviewing court may not substitute its judgment for that of the agency.” Id. (citing Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 376, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989)); ?Presidio Golf Club v. National Park Service, 155 F.3d 1153, 1160 (9th Cir.1998) (citations omitted).
In Bowen, we recently applied the arbitrary and capricious standard to a FDC Act case about whether a Class III medical device was adulterated. See Bowen, 172 F.3d at 687. “?‘Congress gave FDA sweeping discretion in determining the classification of devices and therefore in judging the safety and effectiveness of medical devices.’?” Id. (quoting Ethicon, Inc. v. FDA, 762 F.Supp. 382, 386 (D.D.C.1991)). In Bowen, the appellant challenged whether a machine that sterilizes dental handpieces was a “device” under the FDC Act's statutory definition, and whether FDA acted arbitrarily and capriciously by classifying the sterilizing machine as a Class III device subject to pre-market approval. See id. at 684.>>>
Basically, as long as the agency stayed within its wide berth of discretion, acted professionally, and applied relevant factors, the court CANNOT impose its own opinion, no matter how strongly held or what experts it uses, but MUST accept the findings of the FDA.
It is basically a process argument. Tough to see how the FDA did anything here but conduct one of its most thorough and exhaustive product analysis that it may ever have conducted. Doesn't really matter whether they got it right or wrong in the opinion of anyone else, as long as they proceeded properly and within their very wide mandate as set by law. Which as we all know is almost all encompassing, with great discretion and latitude.
I would expect some share price retracement to account for the perceived risk. The Street usually overreacts to such things, but there was no wholesale bailing after hours, so will have to wait and see how the share price goes tomorrow.
Tinker
"Horse Needle". The needle in question is 23 and is the same size used to pull blood. My children are even brave and don't scream with it at the pediatrician. It does create a moment or two prick however. 1x a week, not a big deal. Take it and forget about it. And again, the efficacy will be superior. Whether the superiority will be very clinically meaningful or not, I don't know.
This said, 23 is not confirmed yet, and 21 is still a concern if a 21 will be required. I think a 23 can move the product with swift sales, but if it turns out to be a 21, then I'll talk "horse needle" and that will be a major issue for sales.
a 21 1x a week or a daily pen needle. That would be a much more difficult sell for the 21.
Tinker
Bydureon will have better efficacy, the head to head will show that. But beyond that, at least initially, it will be whether 1x a day pen delivery, or 1x a week 23 gauge needle (with some mixing) will become the drug of choice.
Also going for AMLN is that the existing byetta users are likely to be a large pool of initial drug switchers to bydureon.
Tinker
That decision pretty much puts AMLN in a situation similar to VRTX, in that they will have the only drug in their class and a virtual monopoly for a few years. I believe the situation is better for AMLN however, because unlike with telaprevir where many HCV drugs are up and coming, and many will have at least as good of efficacy and probably better AE profiles, and the race to remove the existing SoC, exanitide will be the only 1x a week drug, the highest efficacy, years of clinical use on the market, and nothing to dislodge it that will be "better" in any meaningful way, particularly as a pen delivery system for the drug is anticipated in 2012/2013, 1x monthly delivery in works, and even 1x a year in works, and a patch in the works.
The recent news that Roche's drug's efficacy would fall short of exanitide LARS was pretty big, but this gives the field to AMLN for quite some time.
I like monopolies. Not often one can find one that may be available to a company for years to come. But when you do, it usually works out pretty well for the monopoly holding company. Just a matter of seeing what sort of uptake a 1x a week GLP drug will have. I've seen market projections from $1.5-$3 billion a year peak.
Now if only AMLN held 100% U.S. rights like VRTX, but 50% will have to do.
Yes, I've held AMLN since the single digits when the stock blew up on the manufacturing plant issue 12-18 months ago, so I am satisfied to say the least with developments.
Tinker
MNTA Question on Royalty Rates
This may have been previously answered, but what if MNTA gets its approval, and say a few weeks or a few months or even a year or more later a competitor gets their approval, will MNTA's royalty rates drop back into the low to mid-teens, or will it stay in the mid to high 40s? Anyone know?
Tinker
http://www.medicalnewstoday.com/articles/169171.php
To my knowledge it has only been compared to exantide BID, not exanitide LAR. The quick look I did only said it did better than BID, but no numbers or details were given.
Again, not unexpected at all. The future is 1x a week, i.e, exanitide LAR, so that is where the real comparisons will be made. Byetta bid is a good drug, but it is being improved upon.
So the answer is there are no such comparisons that I know of, and I have not seen any numbers to support the conclusions given by Roche for Taspoglutide. I would assume if the numbers were ground breaking the top line numbers at least would have been provided. Maybe they were in a more detailed press release, but I don't have the time to look it up at present if that is the case.
Tinker
Exanitide is without question going to defeat liraglutide in a head to head comparison. Just as liraglutide, without question, defeated byetta (at least at the higher dosage. I am not real clear if at the 1.2 mg dosage liraglutide would still defeat byetta BID on all counts).
It just appears that even with the same drug, the longer acting drugs provide a more constant supply of the drug throughout the day, and this creates superior results.
Also, liraglutide has to be used at a higher dosage than byetta or exanitide need to.
But Novo was quite slick in comparing against byetta and by reflex most people will link that to exanitide LAR. LLY/AMLN really need to come up with a name and identity to differentiation exanitide LAR from exanitide BID. I think Byetta has a chance of gaining some very good branding given how much experience doctors will have had with it prior to any competitors coming on the scene, but it is susceptible to being confused with exanitide LAR, and the efficacy of the different drugs is just not the same. LAR is clearly superior. So a marketing decision needs to be made here in regard to weighing these factors. But something needs to be done.
Tinker
There was a big difference between Prollex and elagolix and that is Prollex was sped through the clinical trial process. They moved past elagolix into phase III while running clinical trials on far fewer patients It was stunning to see how small their clinical trials were.
Yet this was outrageous because the drug is of a class that was previously pulled because of its adverse events.
So they took a drug that was previously pulled from the market, ran it through fast and small clinical trials, and sold it to retail investors as if its clinical results were amazing.
Yes, the FDA had to have given approval to this sort of clinical development, but the difference as to how elagolix was painfully, and slowly moved forward vs. prollex was very apparent.
This said, NBIX is now almost as reliant upon elagolix as RPRX was on prollex. Difference is I think, NBIX has run a responsible and reasonable clinical trial program with elagolix, and they have brought another drug nearly to market (indiplon). That turned into a disaster, with Pfizer as their partner of all things, but it was a drug that should have been approved. NBIX at least picked up experience in the process.
This all said, yes, the critical data set has not yet been provided. Wait until May 2010.
Tinker
That is why NBIX shares are in the dump. The whole company is really riding on whether or not elagolix works sufficiently to satisfy the FDA. There is no data to indicate that it will.
What we do have is older validated scales that demonstrate that elagolix does indeed work. No data otherwise. And the market is not ready to take a flyer without this information.
That does leave an opportunity. A partnership announcement would jump the share price. The May data, if it does indeed validate managements position that the patient population was just not sick enough and that is why the drug surprisingly showed little result on the daily scale, will cause the share price to literally roar. Elagolix, with a solid and reliable phase II, given all the other data to date is easily worth a multiple of the current marketcap.
The question is, does one want to take the flyer and wait it out for the binary event(s). These events are not far off, and either leads to a double, minimum and a triple to quadruple are not out of the question.
On the downside, NBIX has several drugs that are partnered, but nothing that excites me. They do, however have an earlier phase II drug that is not yet partnered, urocortin, that is promising, and if elagolix goes down, a drug that could "save" the shares should it pan out and get partnered in the next year or so on reasonable terms.
So there is potential downside protection (not immediately but in reasonable order). Obviously the market is given almost no value to any drug in development by NBIX at this time. Losing indiplon was devastating to say the least.
Tinker
If I had HCV and I knew about telaprevir then why the heck (absent absolute medical necessity) would I not wait for telaprevir to be approved. It dramatically increases your chance for a cure, it may reduce the duration of your treatment, and if your treatment fails, you may become immune to telaprevir.
In regard to the Hippocratic oath, do no harm, it is blatant unethical to deny patients telaprevir at this time. At least those who cannot wait for treatment. Do no harm. Patients who fail treatment may actually be doing harm to themselves with treatment with telaprevir or with boceprevir could have otherwise cured them.
I have not run the numbers, but a material percentage of patients now being treated but who failed will become immune to future treatment, even telaprevir.
It is ridiculous the FDA has not approved the drug, at least conditionally. Just plain ridiculous and harmful.
But, original point, maybe a lot of patients and doctors are taking the rational and expected course of action in anticipation of telaprevir and yes, even boceprevir.
Tinker
The Canacord report is boilerplate promotional material sent out by a brokerage. The Oppenheimer report is more on the level.
However, both reports are utilizing speculation with information that we already know about, and misusing that information. MNTA has not guided to a 2009 FDA decision, they have stated that such a decision is possible. They have also stated that they think the FDA has all the information that they need. What you do with this information from there is all speculation.
Notice, also, how these reports come out in bunches. Why, all of a sudden, out of the blue, two extremely positive reports?
There is valuable information in these reports to assess potential revenues, timelines, etc., but take the price targets and "beliefs" at your own risk.
These reports provide us investors value from the information given, but the speculations and "beliefs" are meant for promotional purposes. Don't cling to these reports in hope. We already know the fundamentals.
One scenario that I have not seen discussed here before is what if these drugs are given class B status (ie, not directly substitutable). I don't know how that plays out here, or if it is even reasonably possible, but that would be a horrible scenario. Nearly as bad as a rejection, and at this point I don't think a rejection has much chance.
Tinker
Yes, I own lots of shares of MNTA from the mid single digits so quite happy. Trying to figure out the downside here. Probably back to my buy in point, but even paper losses can hurt big time. So here is for approval in the next few months!
Here is my issue with NBIX, WHERE THE HECK IS THE INSIDER BUYING!!! They have this drug, elagolix, that works, potentially a billion + market, late stage 2, actively seeking partners and the company has a market value of $88 billion, with over $50 million in cash. You could pick it up for $30 million for a potential billion drug that is in late phase II.
YEEEETTTTT, no insider buying.
Would not you be buying at this absurdly cheap price if you had any confidence at all that this drug was the real thing?
I can read the science like anyone else, but there are limitations to what we can know. So I also like to look for other clues. NO INSIDER BUYING! Don't tell me it is just because they have so many stock options to begin with (which is absurdly true with NBIX).
One or two insider buys in NBIX would rally the share price and provide great confidence. The lack thereof is like a scream of No! to me, in the present circumstances of the stock.
Tinker
Dew, A question on the M118 results.
I had a few on the specifics but no time to get to that now. But my question involves that this was just a short-term study.
If the relative efficacy of M118 (and by use of the term efficacy I mean that it works and works with fewer adverse events and can be reversed quicker and with less hassles) remains as established in M118 it appears to me that we can expect to see a much larger advantage of M118 if utilized in patients who are followed for longer periods of time.
Is this an accurate expectation going forward into further clinical trials? Not necessarily as presently designed, but it appears that it would be a very telling trial to demonstrate the relative results in a study following patients over a longer duration.
Tinker
Bladerunner,
How do you defend the position that the majority of Americans favor the plan being put together in the House and that Obama would sign sight unseen? Since the healthcare debate started his approval ratings have dropped to 47% according to Rasmussmen from the mid to high 60s. His trustworthy numbers are down to 49%. 57% of Americans say they would rather see no healthcare bill rather than what the Democrats are brewing in the House. And I could go on and on. It is absurd your assetion that 70%+ people want the public option. It is also blatantly obvious that the only purpose for the public option is to get to single payor.
This said, how the heck do you defend the below:
<<<Obama says the healthcare plans being pushed by Democrats in control of the U.S. Congress would ultimately reduce the U.S. budget deficit while at the same time improving health insurance coverage for millions of Americans.
But so far that argument has not taken hold and is proving to be a big challenge for Obama, as he looks ahead to a debate on the issue in autumn -- when Congress is also supposed to take up climate-change legislation.
Since Obama has offered few of his own legislative proposals, he has been left to comment on the ones circulating in congressional committees. Left open has been how to fully fund the $1 trillion, 10-year program.>>>
How does Obama add over a $1 trillion in spending (and Medicare, for example, adjusted for inflation, is presently more than 9x mor expensive then predicted) when the national debt estimates have just been increased to nearly $10 trillion and we know that is lower then it will be, and the deficit for this year alone will probably come in at nearly $2 trillion.
But no problem, what is another trillion here or another trillion there.
What people see is an out of control deficit that will turn this country into, literally, a banana republic, whose strings are held by the debtholders (ie, China), for a plan that will not make the 85%+ of people surveyed who are happy and satisfied with their current insurance plan any happier, or save them any money, or give them additional benefits that they desire (in fact all the plans would outlaw my medical savigns account - but that is another discussion) and the plan will still not cover the majority of the "estimated" 40 million + of people who are presumably without insurance. Of this number 20 million or more have incomes in excess of $60K a year and are young and choose not to be covered, 15 million or more are illegal immigrants, leaving 5 million or so who are uninsured because they are legal and too poor.
We can retract the "stimulus" plan spending (since less than 10% of that has been spent) and pay for insuring this 5%, heck pay for the estimated cost of the entire plan, just out of that stimulus money.
And why is tort reform not even under discussion when there is so much talk of defensive medicine being such a problem?
Really, I would like an answer because the CBO sees this $1-$1.5 trillion in costs and the administrations and Congress's estimates of deficit neutral as absurd.
That is the reason why the healthcare bill is being slaughtered, instead of answering the straight-forward questions they turn around and personally attack the people asking the questions, and they are good questions. The reason these people are attacked is because there are no good answers from the perspective of the proponents of this bill in the House.
So I suggest stopping with the charade, the spin, the blame game, and start directly answering the straight-forward questions for a change.
Tinker
<<<I'd say that even with Elagolix being 3 years or so away from market, if one believes that the drug will ultimately make it there and have even a modest dent in what is a big market, the stock looks a bit interesting at just a market cap of ~$125 million (enterprise value of ~$60 million).>>>
That is indeed what is interesting me. We can all go, WOW!!! that is a potential multi-billion market. Looking at the details that may or may not be the case, but it seems to me that a pill that can produce a minimal amount of bone loss, that is effective, and that mayhave a long life cycle such as elagolix is worth more than $130 million or so, even if cash and other assets are ignored.
Look at CVTX and ranexa. Sales sucked and that was worth more than $130 million.
I do think that NBIX is suffering the post indiplon blues and the fact that one needs to wait for more clarification. A strong partnership agreement could easily double or triple the value of NBIX...NBIX management has been promising a partner on elagolix for quite a long time now however. I think they are also caught up in their own rhetoric and would have been better just to stay quiet until something closed.
I don't own NBIX yet, but it is a very interesting target to delve down into some more given the valuation issue and the potential of elagolix that does not have to be the greatest thing since toasted bread to dramatically raise the value of the shares in due course (meaning patience, patience, but patience within a definable time frame). If all one has is a hope and a dream and a vision but no definable time frame then that is just a dream. In biotech, if you have a drug that you know works, works well, appears to fit at least a lucrative niche, and has a definable time frame to market, that is a calculated investment. NBIX may very well be that at its current valuation. I am going to delve into it closer.
Tinker
For NBIX I brought up the add back option with Lupron, and the advantage of depot formulations as a potential issue that could be a major market issue for elagolix at least a year ago or so. Back then no one cared to even respond to these concerns and ignored them as hog wash (in a different forum of course then this one).
My gut instinct is usually a very good starting place, and one has to think this is going to be an issue for market acceptance. A pill beats a shot, but not if the shot is every 3 months. Depends on how often the pill needs to be taken.
I still need to look at the detailed results of the latest trial to get a handle on it. The initial thesis for elagolis was bone loss so minimal that add back therapy would not be something needed in the typical case. Pop a pill, deal with endometreosis on a long-term basis, forget the bone loss. New paradigm of care in a pill form. The real issue here may be more complicated then the hoped for hypothetical result.
Which is probably why the market has been so luke warm on the news.
But keep in mind people, twice, that is twice now, the market got Provenge wrong, they really got tysabri wrong, at one point that totally blew telaprevir, and the market is extremely good at getting drugs wrong that are new paradigm creating drugs. Which makes looking at elagolix in a more detailed basis very worth one's time.
It still looks like however, I'd say, what, 3 years to market? Not even going to start phase III until late 2010.
Tinker
<<<You have completely missed the point. It is not about compensation but rather about the drive to be in medicine and to see patients. If your drive is stricly financial, then there is no way you are a good doctor because you will simply increase your income by seeing patients one after the other without spending any quality time with the patient to really figure out what is wrong rather than simply reading the result from a test that you ordered>>>
Croumagnon, I am a lawyer who has a drive to do law, advocate for clients and pursue their rights. The reality is, however, although this was part of what drew me to practice law, after just a few years of practice one learns, very quickly, that one gets compensated for their time, effort, risk, etc., from one's work or one goes to an early grave.
Being a doctor is no different. Who is going to pay for their student loans? Their overhead? Their capital investments? For their working 80-100 hour weeks, putting up with years of internship? Only to see that they make no more money, then say, an accountant with just a 4 year degree.
Further, those doctors who are more talented, who work more hours, who push the envelope of care etc., will suddenly find out they are not making any more money, and yet they are still being sued by their patience for malpractice (one aspect of cost control that Obama has not addressed AT ALL {hint: trial lawyers are a big and powerful group within the Democratic party})
Sorry, these guys all love the medical work they do but they are not going to work 80 hours a week, et al., like any other human being, if all they get is a mediocre, basically socialized fee.
Lets put it this way, if Congress wants to give FREE healthcare to 50 million uninsured individuals (the majority of which make enough money to buy their own care anyways and choose not to, and about 10-15 million illegal immigrants) then where are we going to get enough doctors to treat them all?
Hmmm, I know, lets cut their fees even more, that always increased demand to want to produce.
Human nature is such that those who produce more, even if they love what they do, want to be compensated more, they don't want to have to struggle financially, be burdened by 80 hour weeks, forced to see patient after patient after patient with no respite and no quality as this bill will force down their throat, and they want to be differentiated for their efforts. A renowned brain surgeon is not going to continue what he does in a great fashion if he finds that a GP passing out penicillin shots is making nearly as much. SORRY.
That is what happens when you socialize anything. You destroy its quality, and you destroy the supply of people providing the service. Which of course creates the need to ration, and ratchet down more and more. Such as the required "end of life counseling" in the House bill. Also, it is not even thinly veiled, the "public option" is intended as the only option. If it was not, then why did the bill contain language that you can keep your existing insurance, but if you lose your job or want to change insurance your only option is to buy into the public option.
I don't need to go into an entire essay, but your analysis is dangerously flawed. I know it is well intentioned, but such well intentioned feelings have caused great misery in the world when systematically implemented and destroyed more wealth and lives then about anything else I can think of.
Tinker
<<<NBIX has presented their data in a far more acceptable manner than RPRX.>>>
That was apparent to me as well. Here NBIX was taking years of time to run multiple, detailed, phase II trials. 2a, 2b, with multiple arms and RPRX was rushing into phase III with a very small, and very quick phase II. I was like, what the heck? How can they justify this for a non-life threatening indication, for a pill that is intended to treat millions of people and still expect FDA approval? As the board as indicated: SCAM.
I am not saying PDLI was a scam, but you can sometimes find unusual things with drugs. I remember PDLI's highly touted drug for cannot even remember the name (like crohns but lower in the stomache, eventual treatment is removal of the colon). Long day.
Anyways, the drug seemed like a miracle drug with early stage results. But the funny thing is, there was no talk in the industry about this drug. No excitement, no mention in the journals, in the industry, in the field. I turned suspicious on the drug despite phase II results that were quite stellar actually. Reasonable results mind you, but very good efficacy and side effect profile.
Turns out the drug was abrupty pulled shortly thereafter. You just have to look for clues sometimes.
On othe rocasions, like with elagolis, it just might be a drug being overlooked due to the disappointing history of indiplon with NBIX as an example. Time will tell. I am definitely going to take a closer look at it.
Tinker
RPRX dead?
I probably missed the thread here, but RPRX had that "highly" touted drug for endometreosis correct? I was quite doubtful on it given the class of drug that it derived from and its history of adverse events. Nevertheless on chat boards the name kept popping up.
My question is (comment) is that NBIX with elagolix appears to actually have a potential blockbuster drug for this same condition, but without the issues associated with the class of drug that RPRX was promoting.
Anyone here taken a good look at elagolix from NBIX? A pill for endometriosis, that should be as effective as Lupron, et al., without the bone loss complication, with also potential uses for male chemical castration (ie, prostate cancer treatment without the shots).
The stock is selling for a song and a prayer again, yet it has elagolix sitting around with some good phase II data. We know it works, and it looks like the bone density issue is not an issue. Just inquiring if anyone else has taken a look at this drug.
Tinker
<<<While I appreciate the heavy load on many MDs, this is only by design from the AMA and there is no reason on earth why a medical doctor should be making 10 times more than what a PhD makes in this country, when in fact the PhD has to spend more time in graduate school and is never financially rewarded for their respective accomplishments except when they put their talents to work for Goldman Sachs.>>>
Croumagnon,
Respectfully, but are you insane!
Do you want the surgeon, who has gone through years of residency, who is cutting into you to be more on par with say a Ph.D. in philosophy, or social services, or education, or any of the other myriad Ph.D. philosophies?
There is the old saying, that is only half in jest, that for example the space shuttle is made up of 10,000 parts all produced by the lowest bidder.
That is medicine to the bottom of the barrel and is the start to pushing our medical system to the lowest common denominator.
The compensation of doctors is (a) of no concern of yours, and (b) probably of very minimal impact to the overall cost of medical delivery. I will seek out doctors who are highly compensated because, like with lawyers, highly compensated doctors almost always (there are always exceptions) obtained this position because they are damn good at what they do.
If you want to reduce their compensation, and yes, SOCIALIZE the system so that each doctor pretty much makes the same (because this is exactly what will happen if you want doctors to make less) then you go live in your world of commodity doctors, and I'll go to Mexico or off-shore where all the good doctors will move so that they can make good money for their superlative work and talents.
Tinker
<<<Simply based on the extremely limited description of your plan, I'll bet you're in the highest 5% of wage earners in the US (>150K per year). Neither I, nor anyone I know, doubts that high income earners have access to great health care in the US.>>>
But I also get this freedom because of the $5,000 deductible. I pay less, and get more, because I use insurance like INSURANCE, which is to protect against a financial risk rather then as pre-paid medical care.
That is the gist of the problem. Insurance is insurance, not pre-paid medical care. You want to bring costs down, let people actually see their own costs. They can do this by having insurance become insurance again. And given the cost of premiums, people will not be anymore out of pocket with higher deductibles (given the premium savings) then they would be had they just pre-paid, but then overconsumed medical care without care of cost because they see is as "free" anyways because insurance pays it.
Tinker
<<<Tell you what: you tell your private insurer that you're concerned about getting the best care and that in the future, you want to go and be checked out at the Mayo Clinic.
Then come back and tell us what they say.
Private plans are already rationed, and they're subsidized.
I guess this exemplifies what i was talking about before...>>.
It depends on what private policy you buy. I have a PPO and can go to anyone I want, Mayo Clinic, et al.
What you fail to see is that if everyone is forced on the public policy (which the current bill in the House would require in just a few years) we would all be stuck in a plan that is rationing in a manner even more aggressively then Medicare, except, there won't be private insurance to subsidize doctors and hospitals to make up for it.
Get back to me with your choice of medical care when it is Uncle Sam with a practical monopoly in the field, backed by budget deficits equal and growing to in excess to what the United States incurred to fight and win World War II.
Tinker
P.S. As an example, the bill in the House mandates that anyone who loses their coverage or changes coverage must go into the public plan (by law you are not allowed to change your policy and buy a new policy - which was very similar to the provision that Hillary Clinton had in her bill in 1993). Just one example.
It may very well contradict my hypothesis on the value that J&J and the reasons why J&J put such value on the alzheimer program.
It seems clear to me the reason that Elan did this was to have another deep pocket to partner if Biogen gets taken out. I am not aware of all the contractual terms between everybody, but if there is a change of control provision if Biogen is taken out, then Biogen can no longer complain that it has not been acquired because of Tysabri concerns. And it looks like J&J is not overly concerned with liability issues with tysabri either.
All in all, unlike say the alzheimer deal, this may not be a bad deal for Elan. In fact, if Biogen lost its interest in tysabri so to would go the avonex conflict and in may come the superior marketing abilities of J&J.
Tinker
<<<The pramlintide/leptin phase IIa trial enrolled overweight and obese patients with a BMI of 27-35 kg/m2. Think this subgroup might be too 'light' to tolerate 2xday injections.>>>
That is an initial reflex consideration. However, consider what people actually go through to lose weight. I would not be surprised to see models and celebrities and high brow who have access to such stuff clamoring for a drug like this that they can inject that will help them keep the weight off.
People literally starve themselves nearly to death to lose weight. Two pin pricks a day won't get in the way.
The sad thing is that it won't get in the way of someone trying to fit into their bikini but it might be too much for an obese person in the intended group of 27-35 kg/m2.
You know darn well Britney Spears would be on pramlintide/leptin if she could get her hands on it and it would become the "cool" and "in" diet drug.
Again though, not necessarily for the intended patient population for whom I think you might be correct. They may or may not take to two pricks a day. Depends on how big the pin prick will be for one thing. The size of the pin prick won't matter to Britney and her ilk, but it will matter a heck of a lot to obese people in the 27-35 range.
A little faith however, I doubt AMLN would continue to push this drug forward if the required needle size was too onerous to make a potentially commerically successful product. Then again....
More info needed.
Tinker
Yep, there are some issues as it is usually a red flag when the data released is parsed in such a manner.
There is previous data that supports the weight loss data in this trial, but I was not pleased with the focus on the sub-group without talking about the entire population.
This drug is still quite promising, and from what I can divine is the leading drug in clinical trials today (other than AMLN's earlier stage pipeline) but I do not like it one bit when they parse data like this in a press release. Usually it is done for a reason that is not favorable to the drug itself.
The market appears to be shrugging it and giving it no matter, instead focusing on LAR. IF the data when fully released is positive it may provide an upside surprise but I don't think the market puts an iota of value on it at present. So it would appear to have all upside potential and little downside potential for AMLN at present.
Tinker
<<<I'm doubtful if ELN could have struck a better deal, (obviously JNJ wasn't the only player at the table) and to say ELN made a bad deal, is to say that not only every other company that passed on Bap also showed at lack of acumen, but that Citi did a poor job in shopping it.>>>
I am sure ELN got all it could for Bap and the alzheimer program. My calling it a crap deal has to be understood in context that it actually came down to having to sell the crown jewels. ELN's management could have rectified the financial issues long ago without having to make a desperate sale, for what it could get, for the alzheimer program.
Billions of value was destroyed based upon ELN's management's mishandling of this issue. Sure, the financial crisis was out of their control, but ELN could have played it like VRTX, for example, and done a large equity financing when the share price created the opportunity, long before the Bap results were revealed, they could have sold EDT sooner, they could have cut back spending, they could have done a lot of things that they did not do. The end result was this sale out of desperation and they got what they could for it.
Tinker
ELN <<<Regarding the equity component of the deal, you said:
Dew,
I just got to my mailbox. Here are my comments:
<<<2. The first $500M of expenses that JNJ will contribute toward Bap development is worth only half that amount to ELN because JNJ owns roughly half of the JNJ-ELN JV. Absent this provision in the deal, each company would have contributed $250M toward the first $500M of development expenses. This provision is thus worth $250M to ELN.>>>
You certainly have it smacked down when you state that the $500 million in development expenses should really only be a $250 million credit on the deal for ELN and not the $500 million. JNJ would have contributed $250 million to the JV without the provision.
<<<1. I don’t consider the share price of JNJ’s equity purchase to be a bona fide premium to the market price even though it works out to $9 and change. Why not? Because ELN could surely have sold the entire company at that price when the company was shopped around by the IB’s. Moreover, if ELN’s management were competent, they ought to have been able to raise money at that price in a well-timed conventionally underwritten financing with an investor roadshow.>>>
I see it as rather the reverse. It was a "without tysabri" premium. Most conservative drug companies do not want to have anything to do with the potential and unpredictable liability that may be associated with tysabri. It is like dynamite. I think that tysabri is clearly a miracle drug for 10s of thousands of MS sufferers and potentially could be for 100s of thousands. This said, the marketing of the drug has been so horrendous that MS sufferers tend to be more scared of tysabri than they are of MS, even if the MS is putting them in a wheelchair or worse.
I think JNJ paid a premium perhaps to what the alzheimer program may be worth, but they paid it because they were able to acquire these crown jewels from ELN without the risk of tysabri. Different way to look at it, but JNJ can afford to be risk adverse and does not need the potential liability of tysabri, even if it could produce a few hundred million to a billion dollars of profit some day. JNJ does not need that sort of headache.
So I see it as a case where the asset was worth more than the rest of the company because tysabri certainly does not have a negative value, but it implicates the rest of the value of the company when the assets are not taken individually.
<<<3. ELN no longer has any material say in Bap policymaking because JNJ is the majority owner of the JNJ-ELN JV with a 50.1% stake. In the event of a disagreement between JNJ and ELN over development policy, JNJ’s desires prevail and JNJ effectively becomes a 50/50 partner with WYE for policymaking purposes. (Under the old scheme where ELN and WYE were equal partners, a policymaking deadlock could have been settled by arbitration.) I would submit that policymaking control of the JNJ-ELN JV has substantial economic value—perhaps as much as the $250M value to ELN of item #2 above.>>>
There is no doubt about this as well. The minority discount. However, ELN has never demonstrated its ability to properly protect their interests in the subservient role before, and by purposefully putting themselves back into that role I think demonstrates two things: (1) this deal was not out of strength by any means at all, and (2) ELN has realized that it really, really, really, SUCKS at marketing drugs.
My God!!! The number of crohns patients on tysabri, despite the fact that tysabri is a very valuable treatment in that indication (albeit the PML risk is probably worse with the crohns set of patients than with MS due to higher immune modulating drug use and steroid use) can literally be counted on one hand, maybe two hands!!! All this after spending, what, 9 figures bringing the drug to market for that indication.
What about prialt? What about tysabri for MS itself.
I think ELN is realizing that they will make more money as the R&D arm for big pharma then they will at becoming big pharma.
That is really a blow for many who thought ELN could become a big pharma company itself, but that is how I see it, and it may have been a very strategic and purposeful decision for ELN in order to plug this glaring weakness the company has when it comes to drug marketing. Disappointing, but from a perspective of a management consultant, this glaring deficiency is obvious and this plugs it while funneling profits to ELN should the venture succeed. BUT, THEN AGAIN, THAT IS WHAT WYETH WAS FOR. No go back to the it was a desperate move conclusion.
I am still not quite sure what to make of everything investment wise. The market cap has not changed much, but the upside certainly has been diluted by 50% even though the on-going risks are less.
In the end, I really don't like it from the perspective of ELN. As I've stated before, it really SUCKS! From the ELN perspective. How much potential value to ELN management waste and flush down the toilet? We are talking billions and billions of dollars.
Tinker
Dew,
That was my exact feeling, it is a great deal for J&J and an act of desperation, born out of mismanagement for ELN as ELN has given away the crown jewels. If Bap succeeds it will sell 3-4, 10, 15x as much each and every year as the $1 billion received. That is an incredibly large discount rate that J&J has in this investment for any expected rate of return. There is no other way to look at this other than it is a desperation move by ELN unless ELN knows something about Bap that J&J does not and they are playing it close to the vest.
As someone who has followed ELN for many years, this really just sucks! for ELN that is. Although it will ensure their survival.
Tinker
I guess I'll have to listen to the presentation. All the comments on this board make it sound quite positive, with the exception of lack of insight as to when the lovenox decision might come out of the FDA. But the collateral information that went along with it was otherwise positive.
Cannot think of anything else, people selling off shares based upon this presentation? Don't know if anyone came up on any news in regard.
Tinker
As far as biotech stock prices go DNDN was at $2.50 a share not more than 2-3 months ago. I remember when ELN was in the $3s before running up to $35 within 24 months, stayed around $8 forever on the way, and it is back down to the $7s now. VRTX fell to $14 on nothing but market manipulation, no other way to explain that.
Long and short is to figure out what a biotech is really worth, then take advantage of market inefficiencies, manipulations, overreactions, market collapses etc., and then have a heck of a lot of patience. Of course this FDA Lovenox approval process is ridiculous. I have the feeling the U.S. Government is going to be desperately in need of generic biologicals such as Lovenox. Dew's latest back of the envelopes showed $500 million per year saved in the U.S. by generic Lovenox alone, multiply that many times over and it might even equal a blip on the medical cost spending spreadsheet, which is better then any of the other so called "cost saving" provisions being bandied about. So it has to happen. I say this year, but yes, could be next year and if so that will be awfully, awfully frustrating to say the least.
Tinker