Biotech Values

[Rocky3]

I'm back from 2 weeks in Ethiopia so have missed a lot.

So some general comments on what I have been able to get so far:

1) IMS/Bloomberg script numbers: Clearly V-Pak numbers are not being reported by IMS and are underreported by Bloomberg. Part of the reason is known to be the ESPX contract but probably also due to usaage by payors outside normal reporting - VA, prisons, etc. What is unknown is whether Sov/Har reporting is also being underreported due to contractual provisions too. One reason to think so is that Bloomberg numbers are higher than IMS numbers for first time since Sovaldi launch. Obviously the percentages for underreporting for V-Pak are huge (>150% for Bloomberg and >300% for IMS) and percentage for Sov/Hav would be more like 10-20%, but absolute numbers underreported would probably be higher for Sov/Har.

2) 1100 scripts for V-Pak for first 4 weeks is pretty good, but still minute compared to the 14-15K new scripts reported (probably significantly underreported) for Sov/Hav for same time period. V-Pak scripts should continue continue to accelerate and Sov/Har should level off or decline, but real market share gain (>25%) for V-Pak should only occur late in the year when EU finally are meaningful.

3) ABBV guidance - I agree with DD that guidance should be easy to beat, but guidance does imply "only" low $2B sales in '15. Since I think EU sales will probably be main source of revenue and will not start in volume until late '15 and continue to ramp into '16 and '17, I think the previous ABBV estimates of $3B V-Pak sales in '15 are unlikely.

4) ENTA valuation - with very slow pick of V-Pak scripts in '15, I think that pressure on price will continue. I bought some today, replacing some sold last June at around same price. Much more was sold recently are high 40s and low 50s. I plan on buying those back at lower prices if we get there. Mid-term (1-2 years) ENTA should be higher with EU (and probably) Japan sales picking up. Risk is of course Medivir type sales due to competitive products in '16 and beyond (same risk as applies to GILD of course).

All of above based on script info to date and known issues.

Tomorrow's GILD report unlikely to change much, but Q1 earnings for everyone might and Q2 earnings should give much more knowledge of real size of on-going market.

JMO.