Biotech Values

[Rocky3]

Updating my Sovaldi (including all-oral) estimates for 2014:

From March 8;

$8B - $6.00/sh+
$10B - $7.00/sh+
$12B - $8.00/sh+
$15B - $9.50/sh+
$20B - $12.00/sh+

Since I am now looking for $10-12B (which has been moving up every week), I am still looking for $7-8.00 earnings. At a p/e of 20, it would be a price of 140-160.

My worst case is $8B and $6.00/sh with a 12 p/e (no growth, but not a big decline), so a price of $72.

I'm now looking for $11-14B - most likely around $12.75B.

As to earnings, I have reduced my estimates per $1B increase based on Q1 results. At $12.75B of sales, I am estimating ~$7.50/sh. The sales estimate includes WW sales. The Wells weekly estimate is US only, and the highest current estimate from the professional analysts is Stifel which is at $11.865B and $6.80/sh. Obviously, the range estimate is dependent on future sale changes which are currently unknown, and could be significant in Q3 and Q4 (Q2 is pretty well baked-in now). The chance of upside is much higher than the risk of downside for Q3 and Q4 imo.

As to share price, I would move to a 15 p/e (under-market, but recognizing significant general market risk) since I think there will be significant growth in '15 and a stable '16. The issue is still '17 and beyond. The professional analysts don't see a decline until 2018 or beyond, and not much decline then. The market does not seem to agree. Net-net my current value would be $112.50/sh, lower than BMO and Nomura, but higher than most (three others are at $110/sh). A 18-20 p/e would produce a price target of $135-150/sh.