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Gilead Sciences & AbbVie: The End of the Hepatitis-C Trade?
February 6, 2015, 10:52 A.M. ET
By Ben Levisohn
That’s the implication in a new report from Credit Suisse analyst Ravi Mehrotra and team, who cut their rating on Gilead Sciences (GILD), and lowered their price targets on other companies betting heavily on Hepatitis-C, including AbbVie (ABBV), Enanta Pharmaceuticals (ENTA), Bristol-Myers Squibb (BMY), and Merck (MRK).
Bloomberg News
Mehrotra and team explain why he downgraded Gilead Sciences…
We are downgrading our rating on Gilead Sciences to a Neutral (from Outperform) with a new TP of $115 (previously $130) on the back of lower medium/long-term HCV franchise revenues, which in turn is principally driven by lower net pricing. Whilst the much debated pricing dynamics (especially the expected 46% gross to net discount by Gilead Sciences’ mgmt. on the Q4 earnings call) caps the upside potential for Gilead Sciences’ HCV franchise, the company’s valuation and capital allocation policy also provides downside support. For the stock to work again, we believe the street will need to refocus on the pipeline – this is most likely a mid/late 2015 event in our view.
…and lowered his price targets on AbbVie, Bristol-Myers Squibb, Merck, and Enanta Pharmaceuticals:
We take a fresh look at our Hepatitis C model given evolution of pricing dynamics in the space and specific disclosures on recent earnings calls. Our more negative view on pricing suggests a global peak HCV market opportunity of ~$16Bn (vs. ~$18Bn before). Towards that end, we…lower estimates/TP on AbbVie ($69 TP from $74), Enanta Pharmaceuticals ($40 TP from $55) and Bristol-Myers Squibb ($68 TP from $69). We raise our Merck HCV estimates as we give them more share in the outer years (putting it at parity with AbbVie) but lower our near-term Merck sales and EPS estimates given other model revisions following 4Q 2014 earnings/2015 guidance and lower our TP to $60 (from $61)…
[We] continue to see favorable risk-reward on AbbVie, especially following recent weakness in the shares, although the stock will likely be range-bound in the near-term. As a frame of reference, if we remove ALL HCV revenues but maintain ALL expenses our AbbVie DCF would still be ~$61…
We continue to see Bristol-Myers Squibb’s position increasingly weakened in this space; our peak HCV Bristol-Myers Squibb sales now <$1Bn…
The negative price trend is offset for Merck by meaningful increases in patient share to ~20% in outer years (from ~13% before). We continue to see more upside for Merck on the share front, although, this is likely to come at Gilead’s expense more so than AbbVie.
Shares of Gilead Sciences have gained 0.5% to $100.43 at 10:47 a.m., while AbbVie has dropped 1% to $57.43, Merck has risen 0.8% to $59.64, Bristol-Myers Squibb has ticked up 0.1% to $60.27, and Enanta Pharmaceuticals has jumped 1.9% to $35.83.
My take: Time to buy HCV stocks :P
We have ENTA's current EV of $300m ($650m cap - cash on hand & 2015 milestones). So the street, using ENTAs current cap, doesn't expect ABBV to do $8b HCV sales throughout the entire life of v-pak. And they're also attributing 0 value to the next gen program or anything else in ENTA's pipeline. Seems a bit crazy...
On another note, does anyone have any thoughts/ideas on what ENTA should do with its horde?
I'd say the guy who got the rawest deal is the guy who didn't have access to ANY 95% cure rate HCV drug before ABBV entered the market.
ENTA down 10% (losing close to $100m market cap) and down 23% makes very little sense...
by EOY w/ royalties and Japan approval ENTA is going to have roughly $400m of cash. Current cap is $738m.
ABBVs run rate comment is causing analysts to predict sub $2b sales for 2015. ENTA is getting hit on that, which is pretty ridiculous as no way ABBV comes in at sub $2b.
They also expect a # of other excluive contracts to wrap up in the next 30 days
ABBV/ENTA 4q V-Pak sales = $48m.
Not bad for 12 days (Dec 19 approval).
Thanks dewophile. Appreciate all the analysis!
Any comments on why MRK accelerated their approval timeline for grazoprevir and elbasvir once daily combo??
Fair enough. I actually thought about the overlap possiblity after I posted.
So then 25% give or take is probably a fair number to start with? Not bad at all so far.
So per my shoddy math ABBV seems to have locked up a solid 33-35% of the hcv population in preferred deals, no?
ESRX = 8-10%
co-infected HIV/HCV population = 10%
Medicaid deal = 15% (Using Merrill 30% number as baseline here).
FWIW I'm putting ABBV/ENTA at having around 8-10% of NRx market so far which seems pretty good to me only 4 weeks in. The NRx last week was 180 and that was without ESRX #s. I'd imagine there are an additional 150-300 Rx from ESRX (which are not being reported) which is how I arrive at that 8-10%. I guess we'll find out Friday!
What other drugs could one really say are "complex generics" besides copax and lovenox?
more 40mg switch over by TEVA + the fact it gives other Gx copax players another 9 months to catch up with MNTA (if they havent caught up already).
I also think folks are missing the boat on the IMS underreporting ESRX/ABBV v-pak Rx thing. I'd venture to say NRx are probably really in the 350+ range with TrX slightly higher. All that + ENTA still is a thinly traded stock with such a small float. The volume during this $6 drop hasn't been all that impressive. But yeah, the ABBV CC should clear a lot of things up.
Did I miss something? Currently sitting at $878m cap and down over 8% to start the year.
Welp not much room for error in a 100% probability. Nice call.
They could still launch at risk if approved tomorrow which would be the reason to fight it. I can't see NVS signing off on that though (the at risk launch).
Is there any estimate on size of that co-infected market?
Answered my own question. This is from the AIDS.Gov website: More than 1.2 million people in the United States are living with HIV infection. About 25% of people living with HIV in the U.S. are coinfected with HCV, and about 80% of people with HIV who inject drugs also have HCV.
ADAP Crisis Task Force Announces Groundbreaking Agreement with AbbVie for Hepatitis C Treatment Viekira Pak™
Not sure there's much impact here but didnt see posted anywhere else
ADAP Crisis Task Force Announces Groundbreaking Agreement with AbbVie for Hepatitis C Treatment Viekira Pak™
January 15, 2015, Washington, DC – The ADAP Crisis Task Force (Task Force) has reached a new pricing agreement between AbbVie and AIDS Drug Assistance Programs (ADAPs) for Viekira Pak (ombitasvir/paritaprevir/ritonavir tablets; dasabuvir tablets) for the treatment of hepatitis C (HCV). AbbVie is the first company to offer a discount on the ADAP price of an HCV medication in the era of new curative HCV treatments. The agreed-upon ADAP price for Viekira Pak, negotiated between the Task Force and AbbVie, reflects voluntary discounts and rebates that are significantly lower than the wholesale acquisition cost (WAC). While many ADAPs may not be able to add Viekira Pak to their formularies due to fiscal constraints, this agreement recognizes the importance of access to hepatitis C medications for people living with HIV and demonstrates good faith that access at a discounted price may lead to formulary inclusion. ADAPs make individual decisions about adding new medications to their formularies.
The Task Force has worked collaboratively with Abbvie since 2003 to provide ADAPs access to discounted pricing on its HIV drugs. Hepatitis is the leading cause of non-AIDS-related death in people co-infected with HIV and hepatitis. It is estimated that up to 30 percent of people living with HIV are also infected with HCV. Co-infection of HIV and HCV increases the progression of liver disease and can occur without symptoms. Viekira Pak was approved with a co-infection indication, making it explicitly accessible for people living with HIV to be able to take this medication. By nature of the structure of the Ryan White Program, ADAPs are only able to provide services for individuals who are living with HIV, not those who are mono-infected with HCV. Understanding the impact of HCV on those living with HIV, AbbVie voluntarily negotiated with ADAPs on the price of Viekira Pak. This medication, a combination of three antiviral agents, joins a new class of HCV medications boasting up to 99 percent cure rates after 12 weeks of treatment. Viekira Pak’s Food and Drug Administration approval was based on the results from Phase 2 clinical trials which showed that Viekira Pak cured 97 percent of liver transplant recipients and 92 percent of patients co-infected with HIV and HCV.
“This landmark decision by AbbVie to negotiate with the Task Force on an ADAP price for Viekira Pak is an important opportunity to expand access to treatment for people living with HIV and hepatitis C,” stated Annette Rockwell, coordinator of the Massachusetts HIV/AIDS Drug Assistance Program (HDAP) and a member of the Task Force. “We thank AbbVie for agreeing to price this new medication for ADAPs at a point that will allow meaningful access for persons living with HIV and hepatitis C co-infection. Our long working relationship with AbbVie made this new agreement possible, and means that individuals with HIV and HCV have an opportunity to access curative treatment for HCV and enhance their ability to effectively manage HIV infection,” added Dawn Fukuda, Director of the Office of HIV/AIDS, Massachusetts Department of Public Health.
About the ADAP Crisis Task Force
Formed in 2002, The ADAP Crisis Task Force (Task Force) negotiates reduced drug prices for all AIDS Drug Assistance Programs (ADAPs). ADAPs provide life-saving HIV treatments to low income, uninsured, and underinsured individuals living with HIV/AIDS in all 50 states and the territories. Task Force membership is currently comprised of representatives from California, Florida, Louisiana, Massachusetts, New York, North Carolina, Texas, and Washington state HIV/AIDS divisions. The current agreements with manufacturers reduced ADAPs’ antiretroviral costs by $263 million in 2013. The cumulative savings of the Task Force agreements, from 2003 to 2013, totals more than $2 billion. Task Force negotiated prices for antiretrovirals average a discount of more than 50% from Wholesaler Acquisition Cost (WAC). Seven of the antiretroviral manufacturers have frozen prices until the end of 2015.
About NASTAD
Founded in 1992, NASTAD is a nonprofit national association of state and territorial health department directors who have programmatic responsibility for administering HIV/AIDS and hepatitis health care, prevention, education, and supportive services programs funded by state and federal governments. For more information, visit www.NASTAD.org.
They discuss any timeframe on getting that puppy into the clinic?
The Anthem deal was announced during trading hours when ENTA actually climbed to where it closed. The AH volume is miniscule so wouldn't make anything of it.
AbbVie Issues Strong Outlook for 2015
- Expects Adjusted Earnings Per Share of $4.25 to $4.45 (GAAP EPS of $3.99 to $4.19); Guidance to be Further Refined as HCV Launch Progresses
- Guidance Midpoint Reflects Adjusted EPS Growth of More Than 30 Percent from AbbVie's Previously Communicated 2014 Guidance Range
NORTH CHICAGO, Ill., Jan. 8, 2015 /PRNewswire/ -- AbbVie (ABBV) today issued earnings-per-share guidance for the full-year 2015.
AbbVie expects diluted earnings per share of $4.25 to $4.45 on an adjusted basis, and $3.99 to $4.19 under Generally Accepted Accounting Principles (GAAP), for the full-year 2015. The midpoint of the 2015 guidance range reflects adjusted earnings-per-share growth of more than 30 percent from AbbVie's previously communicated 2014 adjusted EPS guidance. AbbVie intends to further refine its 2015 guidance as the HCV launch progresses.
AbbVie expects its industry-leading growth in 2015 to be driven by continued strong growth from HUMIRA and the launch of the company's HCV regimen, VIEKIRA, partially offset by a decline in several products due to generic competition including AndroGel and the remainder of the lipid franchise.
"AbbVie has delivered strong performance in our first two years as an independent company and we expect to continue building on that momentum in 2015 with a return to top-tier growth," said Richard A. Gonzalez, chairman and chief executive officer, AbbVie. "In addition to generating strong financial results, our priorities this year include strong commercial and operational execution as well as advancement of our promising pipeline."
In 2015, the company expects a number of important data and regulatory milestones, as well as clinical program advancements, including:
Regulatory approval of HCV regimen in Europe
HCV regulatory submission in Japan
ABT-199 data in relapse/refractory CLL patients with 17p deletion
Zinbryta (daclizumab) regulatory submissions in U.S. and Europe
Elagolix Phase 3 data in endometriosis and Phase 2b data in uterine fibroids
Phase 2b data from next-generation HCV program
U.S. regulatory approval of Duopa for advanced Parkinson's disease
Mid-stage data from selective JAK-1 programs
Elotuzumab Phase 3 data in multiple myeloma
Mid-stage data from a number of oncology programs including veliparib, ABT-414 and ABT-199 in other indications
HUMIRA hidradenitis suppurativa regulatory decisions
HUMIRA uveitis pivotal data and regulatory submissions
The company's 2015 adjusted diluted earnings-per-share guidance excludes $0.26 per share of intangible asset amortization expense and other specified items primarily associated with separation-related costs and ongoing restructuring activities.
The company will provide detailed 2015 guidance, including product sales estimates and other financial metrics, on its fourth quarter earnings conference call, scheduled for Jan. 30, 2015.
Looks like GILD has locked up Anthem as primary Hep C therapy...
Ah so not a new holder...just increased their position
Nice to see a big boy loading up post approval. Is there a way to see Eagle's biotech holdings?
ABBV getting hammered on what I would call expected news which is curious. Wouldn't this (along with what looks like only a 15% discount to ESRX) be good news for ABBV considering the duopoly situation seems to be shaping up quite nicely at this point?
And before ESRX and perhaps other PBM deals go into action on Jan 1...so yeah, pretty silly to assume anything from the 14.
Do you expect more deals like this from Abbv? I'm pretty surprised abbv is red on this news.
Not in 1b
Label is out. Seems to be in line with what folks were expecting:
https://pbs.twimg.com/media/B5P3VM3CUAEIT_1.jpg:large
Prehaps some VCs are selling. ABBV has bounced $1.5 from the news.
Interesting action so far today. GILD up 2.8%, ABBV, down .75% and ENTA around even...
Any word from $BMY? Is it at this point safe to say they won't be submitting their application?
yeah i don't think a possible delay has anything to do with it...