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"Where is everybody? Unusually quiet board today for a business day."
Doing their taxes?
I mean they have that $4b nuc they bought so wouldn't going after price hurt them maybe in the long run (unless they've already given up on it).
"Regarding MRK's strategy for pricing etc, any thoughts on what they plan on doing? I can't see them going after price so seems like they'd be more going after GILDs share, no? Any other thoughts?"
Why wouldn't go after price? What other way will they be able to get share? Why would they care whose share they take? They will want share, period.
That said, it will not be easy to get. Most of the payers will be tied up. It will be a lot of time, and, by then, both GILD and ABBV will have new (and probably better) products on the market. And lots and lots of patients will already be cured. It just seems to me that the numbers of patients will be going down by '17 (EU increases will not make up for US declines) and price will be only way to compete. Hope I am wrong.
From DB yesterday - $GILD, $ABBV, $ENTA, $MRK
https://twitter.com/dougheuringaria/status/585258582666412033
If those numbers are anywhere near correct (and many numbers elsewhere in the report don't seem to make sense), '16, and '17 should have blow out numbers for GILD, ABBV, and ENTA. If MRK enters in late '16 and ACHN sometime later, the gross dollar sales may decrease, but it really isn't what I would call a "cliff." As has been clear for the last 15 months, this is a much larger market than anyone guessed.
From the Fool http://m.fool.com/investing/general/2015/03/28/could-these-experimental-drugs-eclipse-harvonis-hi
Interesting guessing game. Anyone with other thoughts?
Relatively few drugs attain the esteemed blockbuster status of $1 billion in annual sales. For those that do, many of them take several years to reach that mark. Gilead Sciences (NASDAQ: GILD), however, raised the bar with the launch of hepatitis C drug Harvoni. In just its first three months on the market, Harvoni generated revenue topping $2.1 billion.
We asked three of our biotech analysts which experimental drugs they think might have the best shot at doing even better than Harvoni. Here's what they had to say.
Brian Orelli: If any drug is going to be able to beat Harvoni's launch, it will probably have the same characteristics as Harvoni. That is:
Be a cure (which allows for a higher price than drugs for a chronic condition).
Treat a disease with an unmet medical need (it's hard to launch fast with competition).
Have enough patients with the disease (it's hard to launch quickly in an orphan indication).
Assuming the treatment is eventually approved, bluebird bio (NASDAQ: BLUE) has the first two characteristics with its LentiGlobin BB305 drug product for sickle cell disease. The estimated 90,000 to 100,000 Americans with sickle cell disease is substantially less than the 3.2 million Americans with hepatitis C, but because we're talking about launch versus total sales, there are probably enough patients to ramp up sales quickly given the unmet need for sickle cell patients.
A couple of caveats are needed here, though. Bluebird is testing LentiGlobin BB305 in an orphan indication called beta-thalassemia that only affects about 15,000 patients in the U.S. and Europe. If the treatment is approved for that disease first, and we're starting the comparison-clock with Harvoni at that point, it might have trouble matching sales right off the bat, given the smaller patient population.
Also, like Harvoni, price is going to be an issue. LentiGlobin BB305 is much more expensive to manufacture than Harvoni, so it will likely be priced much higher. If bluebird has trouble getting insurers to sign on to its high price, it will mute the launch.
Finally, the launch could be limited by the manufacturing of LentiGlobin BB305. The treatment is patient specific, first requiring the removal of patients' hematopoietic stem cells, then gene therapy on those cells to insert the functioning gene, and finally, an autologous stem cell transplantation to put the cells back in the patients. Depending on bluebird's manufacturing capabilities when it's approved, the launch could be limited by the number of patients that bluebird can treat rather than the number of patients that are actually prescribed the treatment.
Those caveats aside, however, I see promising potential in this drug to surpass the incredible ramp-up of Harvoni if approved.
Keith Speights: Biogen (NASDAQ: BIIB) rocked the biotech world recently with its announcement of results from an early stage clinical study of aducanumab in treating patients with Alzheimer's disease. The drug demonstrated a statistically significant slowing of cognitive decline and reduction of amyloid plaque, which is prevalent in the brains of patients with Alzheimer's disease.
Why could aducanumab potentially outshine mighty Harvoni? Two of the criteria mentioned by Brian make the case. First, to say that Alzheimer's is a disease with an unmet medical need is an understatement. There is no approved treatment proven to be effective at treating this horrifying disease. Second, the number of people with Alzheimer's disease is huge -- around 25 million worldwide. With the populations aging in many countries, including the U.S., this number appears likely to grow even more.
Granted, aducanumab is not a cure for Alzheimer's disease. However, the enormity of the need, combined with the magnitude of patients, prompted Leerink Partners analysts to project peak annual sales of $14.5 billion. If they're right, it probably won't take the drug very long to hit that level.
Biogen plans to skip straight to phase 3 testing with its promising Alzheimer's drug, but it's still early. A lot could happen to derail the drug. On the other hand, we could be wondering in just a few years what drug could possibly eclipse the launch of aducanumab.
Todd Campbell: Harvoni targets a pretty big population, but there's arguably no bigger market in terms of patient population than the market for heart-disease medications like statins. According to Express Scripts, high cholesterol (a key risk factor of heart disease) affects as many as 71 million people in the United States alone.
As a result, some of the planet's best-selling drugs have been cholesterol-busting medications, such as Pfizer's Lipitor. Prior to losing patent protection in 2011, Lipitor was racking up sales of $12 billion per year. With jaw-dropping sales like that, it's not a stretch to think that the launch of Amgen's (NASDAQ: AMGN) bad-cholesterol-fighting drug Repatha could result in a Harvoni-like sales launch.
The FDA is slated to make a decision on whether or not to approve Repatha in August. If it gives Amgen the green light, the drug will initially be approved for use in patients that don't respond to, or whose bad cholesterol is inadequately controlled by, statins. Since Express Scripts thinks Repatha could have a price tag of $10,000 per year, and Repatha could be used in hundreds of thousands of patients out of the gate, this drug could have a shot at eclipsing Harvoni.
From Cleveland Clinic on other generic:
http://consultqd.clevelandclinic.org/2015/03/results-of-gate-trial-pave-way-for-more-affordable-ms-therapy/?utm_campaign=qd+tweets&utm_medium=social&utm_source=twitter&utm_content=150326+results+trial+more+affordable+ms+therapy&dynid=twitter-_-qd+tweets-_-social-_-social-_-150326+results+trial+more+affordable+ms+therapy
Generic glatiramer acetate proves equivalent to Copaxone®
The first generic versions of a leading therapy for multiple sclerosis (MS) may soon be on the way, thanks to results of an international trial recently presented by Jeffrey Cohen, MD, Director of Cleveland Clinic’s Mellen Center for Multiple Sclerosis Treatment and Research.
Dr. Cohen served as lead investigator of the GATE trial and presented its results at MS Boston 2014, the joint meeting of the Americas and European Committees for Treatment and Research in Multiple Sclerosis (ACTRIMS/ECTRIMS).
The double-blind randomized study set out to compare the proprietary version of the MS medication glatiramer acetate (Copaxone®) with a generic version of the compound (produced by Synthon Pharmaceuticals) and with placebo in 735 ambulatory patients with relapsing-remitting MS. All treatments were given by daily subcutaneous injection for nine months.
A paucity of affordable therapies
Copaxone was approved by the FDA in 1997, but no generic versions are currently available for it or other leading MS therapies.
“Some of the first MS medications are going off patent, which creates an opportunity for generic versions to be approved, which could bring patients significant savings in medication costs,” Dr. Cohen says. Many MS medications cost patients between $40,000 and $50,000 a year.
Not a standard generic equivalence study
Yet because glatiramer acetate is a complex polypeptide mixture, the standard pharmacokinetic comparisons used in generic equivalence studies are not possible. “This complexity means that small differences in how a generic version is manufactured could produce significant changes in the safety or efficacy of the compound,” Dr. Cohen explains.
The GATE study found no such changes between Copaxone and the compound’s generic version. Among the key study findings reported by Dr. Cohen:
The numbers of gadolinium-enhancing MRI lesions were the same over months 7 to 9 (the study’s primary endpoint) in patients treated with Copaxone and its generic version, and both groups showed superiority over placebo.
Rates, types and severity of adverse effects were similar with Copaxone and the generic version.
Now in the FDA’s hands
The fate of Synthon’s generic version of the compound now rests in the FDA’s hands. Although the GATE results bode well for its eventual approval, Dr. Cohen suspects the compound’s complexity may result in a longer-than-typical review time.
Still, the tide may be turning on generic versions of MS therapies — and patients stand to benefit in the pocketbook.
$ENTA - I say hold for awhile, because I don't really believe in market timing. I think that it is difficult to put money to work when the overall market is within 5% of an all-time high and get good long-term returns. There can be a lot of downward pressure in the short and mid term from market forces. That said, I like small and mid cap stocks because they generally are less affected by the overall market.
As to ENTA specifically, I think that it should have a very good 2016. EU sales should be coming on board and there should be no new HCV competition until late in the year.
It seems to me that most stock board posters want stock movement in weeks or months at the latest. I'm willing to wait a year or two at a minimum unless something fundamental changes.
For instance, I have been putting a lot of money in $FMSA, a sand company dependent on the fracking and oil industry. It is priced for near bankruptcy and I am willing to wait for the one to three years that I think that it will take for oil prices to rebound. If I can get a double or triple over two or three years, that's good enough for me. And often, the price keeps going a lot higher.
they certainly have the cash for it
Basically every single piece of bad news that could happen is baked in to the price
$ENTA - bought some more today - any guesses on weakness other than scripts and/or more sellers?
From Wells yesterday:
• Summary: At the end of last week, FDA issued a Dear Doctor and added
warnings to the labels of Sovaldi and Harvoni regarding a potentially fatal
drug-drug interaction with cardiac drug amiodarone. Based on our analysis of the
FDA’s AERS (Adverse Events Reporting System) database, which we have been
collecting for the drugs since their respective approvals, as well as IMS data, we
believe the side effect is likely limited to concurrent use of amiodarone and that
the use of amiodarone in HCV patients is relatively low. As such, we would not
expect this to have any material impact on uptake of GILD’s HCV drugs or on the
company’s future revenue stream. Given the importance of these drugs to GILD’s
franchise, we could see stock weakness initially on the headlines, but we would
see this as a buying opportunity.
• New warnings on interactions between Sovaldi/Harvoni and
amiodarone causing bradycardia (heart rate slowing) incorporated
into labeling. On Friday (3/20), a Dear Doctor letter was issued conveying that
serious, life threatening symptomatic bradycardia has been observed in HCV
patients taking Sovaldi and Harvoni along with the cardiac arrhythmia drug
amiodarone, and the labels were updated to incorporate a warning not to
co-administer the drugs. FDA cited 9 cases reported to them (6 Sovaldi, 3
Harvoni), including one death from cardiac arrest and several pacemaker
insertions required. There had not previously been any drug-drug interaction
information with amiodarone on the drugs’ labels. We have all of the FDA’s AERS
(Adverse Events Reporting System) data for Sovaldi and Harvoni through
end-2014, and including reports of bradycardia, syncope (fainting, which may
have been from heart rate slowing), and sinoatrial block, we found 6 unique cases
on Sovaldi as well, all of which required hospitalization, and zero on Harvoni (so
the Harvoni cases must have occurred in 2015, and the death on Harvoni).
• Our analysis of the AERS database suggests the cardiac side effect is
indeed likely limited to use of Harvoni/Sovaldi with amiodarone and
we are not concerned, nor do we think physicians will be concerned,
about this occurring in the absence of this heart drug. Among 3,894 case
reports FDA collected from the drugs’ availability through end-2014, 7 patients
were listed as taking amiodarone, and 6 of them experienced bradycardia or
similar symptoms (86%). In contrast, we found 8 patients out of the 3,887 not on
amiodarone who experienced bradycardia while on Sovaldi or Harvoni (0.2%).
This all points to a strong association between amiodarone and bradycardia, and
no real association between Sovaldi/Harvoni and this side effect in the absence of
amiodarone--which should give physicians comfort in continuing to use
Sovaldi/Harvoni in all patients other than those few on amiodarone.
$GILD/$ABBV/$ENTA/$MRK
My Gastroenterologist/Hepatologist. Had another appointment today. At the end I brought up HCV treatments.
1) Still a lot of patients coming through. Those getting treated are mostly the sickest. Totally driven by payors - will treat as many as can get coverage now.
2) Cleveland Clinic has also indicated that it would cover only the employees that are sickest.
3) Prefers to use Harvoni since it is "easiest," but will use whatever can get approved by insurance.
4) Is convinced that prices will come down further when additional competition is available, so it makes sense to delay treatment for those with the lowest viral loads.
From Wells:
**IMS data for the week ending 3/13/15 became available this morning.
**Harvoni NRx, what we view as the most important measure of uptake, were approximately flat again this week, at 4,167 vs.4,111 last week. TRx were 10,152, above last week's 9,754.
**Sovaldi NRx were 675, we believe continuing to reflect steadystate in the GT2/3 population at around $2.53B in U.S.revenues.
**Projecting out for 2015, assuming new patient starts remain flat to slightly down the rest of this quarter (accounting for the current runrate), and decline at a rate of 1.2% throughout the rest of the year, GILD's global HCV sales would be tracking ataround $17B for the year ($11B U.S. Harvoni + $2.8B U.S. Sovaldi + $3.2B ex U.S. HCV sales), which we believe is above consensus. This assumes that IMS captures 68% of actual patient use, as per our estimated tracking from 4Q14; this is a keyvariable.
**BOTTOM LINE: Steady HCV as access likely broadens, suggesting reasonable sustainability for a HCV franchise we believeGILD's current price undervalues.
NRx is approaching 10% penetration without ESRX and some of the smaller exclusives that have yet to really come on line like NY Medicaid
I'm quite confident now that by Q2 ABBV/ENTA will have 20% market share in the US.
Curious ENTA is trading down today
$GILD - Of the 22 anaylst reports after 4Q14 that I reviewed, 14 gave estimates for Q1 for earnings and HCV sales. Some of them broke down the sales estimates into US and OUS. The following is the list of each analyst ranked by HCV sales estimate - highest to lowest. This post is responding to my post that summarizes the estimates for earnings and HCV sales for '15 and beyond.
Analyst - Q1 earnings est - HCV est. - US/UOS
Baird - $2.98/sh - $5.279B
Maxim - $2.46/sh - $3.924B
WellsFar - $2.34 - $3.829B - US $3.121B/EU $.591B
MorgSt - $2.33/sh - $3.699B - US $2.384B/EU $1.025B
Cowen - $2.45/sh - $3.625B
WmBlair - $2.26/sh - $3.620B
Guggenh - $2.41/sh - $3.599B
Piper - $2.16/sh - $3.565B - US $2.88B/EU $.625B
Needham - $2.05/sh - $3.542B - US $2.707/OUS $.83519
BMO - $2.31/sh - $3.530B
RBC - $2.12/sh - $3.450B - US $2.825B
CredSuis - $1.89/sh - $3.404B
Nomura - $2.08/sh - $3.242B
JPMorgan - $1.78/sh - $2.799B
My current guess is for $2.80/sh (vs. ~$2.28 current consensus) and $4.4B sales of HCV scripts. $2.80/sh of earnings results in about $9.40/sh of TTM earnings. Again, the amount of OUS HCV sales is the largest unknown.
While I retained some of my Gild shares I'm having trouble wrapping my mind around their current market cap. If I look strictly at the financials there seems to be room for much more growth but when I see they a valued 30% more than Amgen, 50% more than Biogen and are priced at 75% of Pfizer I get a little scared.
Rocky3, do you agree with Wells that GILD is undervalued?
From Wells:
**IMS data for the week ending 3/6/15 became available this morning.
**Harvoni NRx, what we view as the most important measure of uptake, were approximately flat again this week, at 4,111
vs. 4,132 last week. TRx were 9,754, above last week's 9,553.
**Sovaldi NRx increased again slightly this week, at 753 (vs. previous 705), we believe continuing to reflect steady-state
in the GT-2/3 population.
**BOTTOM LINE: Continued steady HCV uptake, suggesting reasonable sustainability for a HCV franchise. We continue
to believe GILD is undervalued relative to peers even with the longer-term HCV uncertainties.
SLXP - So I made the decision to play the takeover when the rumors of interest came out, but was disappointed with the VRX offer and sold. So I was right that $175 was an reasonable price, but didn't have the guts to stick around.
My best guess is that these options were qualified.
He had around 250k shares prior to this transaction so I'm sure his current sales are from the preceding group so his taxes should only be long term.
The stock sales would have yielded about $4,460,000 gross, and after capital gains tax (assumed to be 30% federal and state), roughly $3,120,000 net.
From Wells:
**IMS data for the week ending 2/27/15, the week after President's Week, became available early this afternoon. **Harvoni NRx, what we view as the most important measure of uptake, were approximately flat again this week, at 4,132 vs.4,154 last week. Given the stability in scrips during last week's holiday week, we had not expected a major bounceback. TRxwere 9,553, above last week's 8,859. **Sovaldi NRx bounced back slightly, at 705, we believe continuing to reflect steadystate in the GT2/3 population at around$3B in U.S. revenues. **Projecting out for 2015, assuming new patient starts remain flat to slightly down the rest of this quarter (accounting for thecurrent runrate), and decline at a rate of 1.2% throughout the rest of the year, GILD's global HCV sales would be tracking ataround $17B for the year ($10.6B U.S. Harvoni + $3.1B U.S. Sovaldi + $3.2B exU.S. HCV sales), which we believe is aboveconsensus. This assumes that IMS captures ~68% of actual patient use, as per our estimated tracking from 4Q14; this is a keyvariable. **BOTTOM LINE: Steady HCV as access likely broadens, suggesting reasonable sustainability for a HCV franchise we believeGILD's current price undervalues.
In that $35 PT, Barclays gives ABBV peak rev of $2.5b on v-pak. In the same report they say they now expect ex-US sales to account for 70% of global HCV sales up from their previous estimate of 45%. Something doesn't quite add up when you put those two #s together.
Wonder when the street will wake up and realize ABBV isn't lying when they say they have that 27%.
The issue is simply the generally wide spread and the fact that options are mostly short-term oriented. So that means lots of trading (particularly with combination trades and trades that need to be closed out prior to settlement). Lots of trading and a big spread and you are in casino land.
Options trading is not a lot different from playing at a casino - over the long term the spread will eat up virtually every trader, just as the house edge eats up virtually every gambler.
From Wells:
**IMS data for the week ending 2/20/15 (President's Week) became available today.
**Harvoni NRx, what we view as the most important measure of uptake, were approximately flat this week, at 4,154 vs.
last week's 4,277 - impressively steady, in our view, given the holiday week. TRx were 8,859, compared to last week's
8,832.
**Sovaldi did decline a bit this week, with NRx at 674, vs. last week's 743, though we assume this is reflective of the
holiday week especially given Sovaldi's longer availability.
**Overall, assuming a 1.5% average week over week increase in new patient starts between now and the end of March,
with approximately a 1% average decline in new patient starts each week for the rest of the year, GILD's global
sales would be tracking at $18.4B ($12.6B Harvoni + $2.6B Sovaldi U.S. + $3.22 ex-U.S. HCV sales), which we believe is
above consensus. This assumes that IMS captures ~68% of actual patient use, as per our estimated tracking from 4Q14;
this is a key variable, since if one assumes IMS tracking is at 100%, it would put total WW HCV sales projecting at
$14.3B.
**BOTTOM LINE: Solid Harvoni growth especially given the holiday week; though it will be important to track how robust
the uptake remains for the rest of the year, we believe GILD's multiple continues to overly discount medium-term HCV
uncertainties.
PCYC: $ 1.26 in 2009 $219.00 today
Re EYES (up 30%+ today):
https://finance.yahoo.com/news/second-sight-announces-first-commercial-120000649.html
Second Sight Medical Products, Inc. (EYES) (“Second Sight” or “the Company”), a developer, manufacturer and marketer of implantable visual prosthetics to provide functional vision to blind patients, today announced that all three of the centers approved to implant the Argus II Retinal Prosthesis System (“Argus II”) under the French Government national healthcare reimbursement program entitled ‘Forfait Innovation’ have successfully completed their first implants in patients with retinitis pigmentosa (RP). Current French implant centers are located in Paris, Bordeaux, and Strasbourg.
I don't think we've ever had a situation like this before - roughly comparable drugs for a huge market competing on a mixture of price and other characteristics. It's inherently unstable I think, and will grow even more so with more entrants.
Why invest in HCV research?
I guess I would divide into two categories - long odds and doubling down/already committed.
Start with the chart of size of the market opportunity - which is still huge in absolute terms. I like the chart from the recent ACHN offering. See https://twitter.com/TomSilver39/media
So those that are facing long odds and/or can't get to the market by 2019-2020 probably aren't going to spend the money.
But for those who are already committed or are already participating - MRK, BMY, ABBV, GILD, and JNJ (as well as MVIR, ACHN, and ENTA) - there still are pretty big dollars available if you think that you can get at least 10-20% of the market by 2020. Spend $100-200M and have the opportunity for $2B/yr+, declining thereafter. Since it is clear that not everyone will get the 10-20% of the market, there is a lot of risk. Add to it that several players are pretty far back, several might fall out. But even if you can get 5% of the market, it is $1B - unless of course price competition erases a lot of the market value, or speeds it up so that the market has a much bigger cliff, which is clearly where the financial market thinks it is going now.
But if I were BMY (for example) and saw that its pretty inferior product was going to sell close to $1B in '15 (and that JNJ's inferior product was going to do the same in '15, after selling over twice as much in '14), I might try to buy ACHN or somehow come up with another product to stay in the game. $1B is still a nice number, even for BMY. Clearly MRK and JNJ both decided last year to spend a lot more money, and I think the chances for either having a 20% market share are pretty low.
So I think that ACHN, ENTA, and MVIR will spend money in large part because that have to (they are committed to the market and there is not the possibility to going after another "unmet need"). GILD and ABBV will spend money to protect what they already have. BMY, MRK, and JNJ are likely to spend money for a "hope and a prayer." It would make sense to me that one or more of them will drop out in the next couple years, but big pharma has a history of spending money for not-so-good results.
From Wells:
**Harvoni/Sovaldi IMS data week-ended 2/6/15 was just released and showed continued growth in Harvoni, with relative
stability in Sovaldi.
**Harvoni NRx are up another 2% this week to 3,846, with an unusually high uptick in TRx (+7% to 8,396) which may
represent some variability. In the meantime, Sovaldi remains steady, with NRx just slightly down at 751, we believe
reflecting the ~$3B steady-state run-rate for U.S. GT-2/3 usage.
**Plugging these numbers into our proprietary projection tool, at current run-rate, Harvoni U.S. sales look to track at
~$9.4B. This assumes a 46% discount rate--actual discount may be higher, since the cited discount applied to Harvoni
and Sovaldi both and Sovaldi likely less discounted, or may be lower if GILD has been rebating on a per-patient rather
than per-pill basis. The $9.4B assumes a 1.5% week-over-week increase in new patient starts for the remainder of the
quarter, then a ~1% weekly decline in new weekly new patient starts for the remainder of the year to account for the
waning early-year bolus of patients gaining access as well as competition. Adding $3.2B for U.S. Sovaldi and $3.2B for
ex-U.S. HCV sales would project total HCV sales of $15.9B.
**Were new patient start run-rate to remain flat through end-2015, our projector suggests there would be ~177K new
patient starts on Harvoni this year via IMS data - which given IMS's 67% capture rate could represent over 250K actual
new patients treated - potentially leading to global HCV sales of $16.4B.
**BOTTOM LINE: Continued steady growth in new patient starts on Harvoni remains encouraging and continues to
demonstrate good growth/durability of HCV market thus far; we believe GILD is undervalued relative to peers even with
the longer-term HCV uncertainties.
Salix (SLXP) - a couple bidders seem to be interested. Anyone playing? If so, what is likely price? over $175? TIA
For those mathematically challenged (me), the value of the shares minus the cash value is currently $375 million. Or, approximately 3 years worth of earnings, not including Japan earnings.
Do you expect the cash pile to help Enta's share price in the future? (not meant sarcastically)
Re $GILD, $ABBV, $ENTA: From Wells today re the 46% discount. Way too early to know if this is right (and it goes against the normal usage of language), but if it is right, the market is ripe for a huge correction in valuation of all the HCV stocks.
**Recall GILD had recently reported that the gross/net (discount) for their HCV products is expected in 2015 to be 46% --
meaning that for Harvoni, given that Sovaldi is likely discounted less, discounting could be up to 50-55% depending on
each drug's relative contribution to revenues.
**Our understanding now, and something we do not believe may be fully appreciated, is that the 46% blended number
likely refers to a discount per patient, rather than per pill. In other words, patients taking Harvoni for 8 weeks would have
an intrinsic 33% ''discount'' for a course of therapy, so if up to half of GT-1 Harvoni patients ultimately qualify for 8 weeks
of therapy rather than 12, this would itself account for 17% of the 50% ''discount.''
**This would imply that the actual ''per-pill'' Harvoni discount might be closer to 35-40%, and that revenues per U.S.
patient starting on the drug might be incrementally higher.
**Establishing this concept of a discount per patient, rather than per pill, makes sense to us not only because it would
enable GILD to effectively leverage the greater value conferred by a shorter-duration regimen (that ABBV cannot offer),
but would also potentially set GILD up to retain strong per-patient economics even if the regimen is shortened by addition
of a third component such as their PI.
**BOTTOM LINE: Though HCV discounting remains substantial, if indeed the 46% discount already incorporates the
inherently lower cost of the 8-week Harvoni regimen, the actual per-pill discount might be incrementally less -- and
revenues per new patient start incrementally higher -- than anticipated, increasing the likelihood 2015 sales could
meet/beat consensus if prescriptions remain strong. We believe GILD shares overly discount HCV uncertainties.
From Morgan Stanley report on GILD today. I already posted this on Twitter but thought I would try to copy it here - mostly for its comments about MRK being "rational," clearly implying that ABBV was not with its price cuts.
One of the bear fears is that Gilead and AbbVie's rebates have started the slippery slop of a price war that is a
race to the bottom. Specifically, the fear is that the 46% gross-to-net just represents a starting point of additional
downside instead of the end of the road for downside. We believe it actually represents a reasonable base where
further decline may be limited.
Merck Data Not a Slam Dunk
Inherent in our base case, and we suspect among consensus, is that Merck will enter the US HCV market in 2016
with a relatively comparable regimen to Harvoni (i.e., no ribavirin necessary and 12 weeks duration with a single
pill). This reduces our Gilead market share and increases our base rebates by ~10 points. However, we highlight
below why the Merck data could be less robust than Harvoni when it is presented at EASL in April.
Gilead Signals It Will Defend Share - In the complex world of game theory, we believe Gilead offers
the best signal it can to competitors with its recent pricing action. It will defend share at all costs. Thus,
for the next competitor, it should be clear that even if they offer substantial discounts Gilead will match
and the competitor will not gain sig. incremental share. Thus, the competitor is better off matching
price and competing in the market place to gain share. With a rational competitor this preserves the
market price.
Rational Merck - Merck needs HCV less than AbbVie, thus we believe Merck will be more rational.
Further, Merck has been able to watch both AbbVie and Gilead compete in the market place. We believe
Merck clearly understands that if it tried to lower price it will not only hurt Gilead, but will also hurt
itself because it will not achieve enough incremental market share to offset sizeable price declines.
Long-term durability with price - With a rational Merck, what Gilead may have done is just
accelerate the lowering of price from a 3 year endeavor to a 4-6 month endeavor. Thus, flat price again
represents a source of upside (we model another ~15 points of price decline over the next two years in
our base case).
$GILD analysts reports - Have now reviewed 22 different analyst reports after Q4 earnings. Some (like Credit Suisse) have put out a couple reports. Others (like Wells) put out weekly commentary after script numbers, so I expect there will continue to be changes. I did not give a summary after Q3 since the numbers looked pretty accurate, or maybe even too optimistic (though they turned out to be somewhat too low). The numbers again appear too low to me, though nowhere as low as they were after 1Q14. I'm going to give a quick summary of the numbers, primarily by giving the range, medium, and average of the numbers.
Price target - 20 reports provided price targets. 7 were decreased and 1 increased after earnings - the range was from 84 to 159 - the lows were 84 (Jeffries), 85 (Goldman), and 94 (BOAML) - the highs were 159 (BMO), 143 (Guggenheim) - the medium was 120 and the average was 119.55
Q1 earnings - 18 provided an estimate - the range was 1.82 to 2.98 - the lows were 1.82 (Credit Suisee), and 1.99 (Deut Bank) - the highs were 2.98 (Baird) and 2.50 (Barclays) - the medium was 2.285, as was the average.
'15 earnings - 21 estimates - the range was 8.21 to 10.83 - the lows were 8.21 (JPM), 8.42 (CS), and 8.66 (Needham) - the highs were 10.83 (Baird), 10.18 (Wells), and 10.17 (Guggenheim) - the medium was 9.55 and the average was 9,50
'16 earnings - 19 estimates - the range was 8.19 to 14.07 - the lows were 8.19 (Baird), 8.31 (CS), and 8.53 (BOAML) - highs were 14.07 (Maxim), 11.60 (Cowan), and 11.50 (Barclays) - the medium was 10.50 and the average was 10.20
'17 earnings - 17 estimates - the range was 7.72 to 15.41 - the lows were 7.72 (BOAML), 8.16 (CS), 9.84 (Goldman) - the highs were 15.41 (Maxim), 13.00 (Cowan), and 12.38 (Wells) - the medium is 10.90 and the average is 11.04
skipping '18 and '19
'20 earnings - 7 estimates - the range is 6.05 to 18.82 - the lows were 6.05 (CS) and 11.81 (Piper) - the highs were 18.82 (Maxim) and 15.09 (Morgan Stanley) - the medium was 12.45 and the average 12.90
Baird went from the highest numbers in '15 to the lowest in '16 -a cliff in extreme.
Maxim seemed to be the only one that considered Japan HCV revenue to any extent.
If I have time later, I may add the HCV estimates in the reports (and total revenue).
I still think that the Q1 earnings will be much better than estimates. The idea that people can estimate sales and earnings in '20 is pretty silly. But it is their job I guess.
Who was the least wrong, those that were the most bearish on GILD?
Still amazed Olysio has held up so well (NRx as not really declined for weeks) with new all-orals around. Don't get it.
These are likely older prescriptions that are getting filled after a red-tape delay of several weeks.
From Wells:
**Harvoni/Sovaldi IMS data weekended
1/30/15 was released and show Harvoni volumes accelerating, with Sovaldi
remaining in steady state.
**Harvoni NRx are up to 3,781 from last week's 3,627, an increase of 4.2%. We believe this reflects increasing access and
expect this to continue to rise over the next several weeks as additional insurance formularies come online following price
negotiations.
**Sovaldi Rx remain in steady state (NRx 771, TRx 1,941), continuing to suggest an equilibrium and that with our belief
Sovaldi is now being used almost exclusively for GT2/
3 patients, the product's runrate
in the U.S. is approximately $3B.
**Assuming modest (1.5%) weekoverweek
increases in Harvoni new patient starts for the rest of the quarter then some
modest weekly declines throughout the rest of the year due to competition and the initial bolus being worked through, our
scripsbased
projector suggests 2015 U.S. Harvoni sales of $8.6B. Adding the projected U.S. Sovaldi sales of $3.1B and exU.
S. total HCV sales of $3.2B, fullyear
HCV sales appear to be tracking at around $15Bwe
believe at or above consensus,
and illustrating how the increases in prescription volume can help offset the greaterthanexpected
average discounts.
**BOTTOM LINE: Acceleration of Harvoni prescriptions illustrates how volumes should help GILD offset the greaterthanexpected
gross/net and enable fullyear
HCV sales to meet/beat consensus and guidance, even if the greaterthanexpected
discounting does suggests such volumes will need to be sustained longterm
to enable continued robust sales. With large
pharmas having similar modest (4-6%)
EPS growth rates to GILD (AZN, GSK, JNJ) trading at a mean 16.5x, and minimal
credit given to GILD's pipeline, we believe at a substantially discounted 9.8x multiple GILD looks relatively undervalued even
with the longterm
HCV uncertainties.