PK makes many of the same points I have on this board. Thanks PK!
In particular, I like this excerpt --
<<
On the same day that AbbVie-Express Scripts deal was announced, Achillion released data from its HCV pipeline. Whether the data were good enough for Achillion to be competitive was subsequently debated, with most of the commentary focused on whether Achillion’s nucleotide polymerase inhibitor, or “nuc,” ACH-3422, had the same hallmarks of efficacy and safety as Gilead’s and Merck’s nucs. In a phase I trial, Achillion’s nuc took a few days longer than other nucs to knock down comparable amounts of virus, which some interpreted as an inferior outcome. Achillion’s nuc is just one of four HCV drugs that the company has in the clinic that it plans to combine into an effective regimen. Demanding that Achillion’s nuc tie for first place within its drug class fails to acknowledge the lesson from the AbbVie-Express Scripts deal—the bar for getting to the market and competing on price is having a combination regimen that is “good enough.”
Whether Achillion’s regimen is better than Merck’s or Gilead’s is simply not that important. Achieving a 6-week cure is certainly a nice objective and indeed possible, but to get in the game, Achillion just needs to qualify with a regimen that cures most patients in 8 to 12 weeks, a modest goal by comparison that now looks highly probable. With a valuation that is 99 percent lower than Gilead’s, Achillion could exceed expectations by taking even a modest 10 to 15 percent of the market, which is not unreasonable in a 5-player field.
If Achillion does emerge with a regimen that is better than AbbVie’s and Bristol’s, neither of which have a nuc, then these fourth and fifth place players may become unsatisfied with their market share and think about more price cutting to maintain exclusivity in at least one of the few large formularies. This strategy could spark more rounds of discounting by all players, unleashing a potentially unmitigated price war. By acquiring Achillion for its nuc and NS5A inhibitor (another drug used in HCV regimens), either AbbVie or Bristol could both strengthen its own hand and remove one player from the field, at least partially easing competitive pressure. Interestingly, by adding a nuc to its next-generation regimen, AbbVie could dilute the royalty it pays to Enanta Pharmaceuticals (NASDAQ: ENTA) for a protease inhibitor (in the expanded regimen, the protease inhibitor would represent a third of the combination instead of half, unless it were eliminated altogether); reduced payments to Enanta would partially offset the cost of acquiring Achillion.
>>
AI
