HCV dynamics and sales estimates
GILD stated the higher rebate is in part due to higher proportion of government payers where rebating is over 50%, as well as higher rebates to commercial plans in exchange for volume (i.e. expanding access to pts with lower fibrosis scores). however most if the difference in discounting YOY is due to pricing pressure from abbv IMO
GILD gave a good overview of HCV dynamics in the call - this is off the top of my head so not comprehensive:
- they think up to and possibly more than 250K patients will get treated in the US this year (they have said max capacity is somewhere in the 200-300k range in the past)
- there are 1.6M known diagnosed in the US. obviously the 250K number can't be sustained beyond a few years even is they treat almost all of these patients
- over 2M or so undiagnosed that will be treated over many years and probably decades in the US as screening ramps up
-EU has budgetary limits so fewer patients will have access to tx initially, but the commerical tail will be larger in the long run (in fact at some point the EU should account for more sales than the US as the bolus of known diagnosed patients work through the US system faster)
- 60% of payers agreements have been negotiated in the US. Harvoni has access to 80% of the 60% of the payers/PBMs that have concluded negotiations thus far (they did not break down proportion of the 80% that are exclusives). note that this doesn't quite jive with what ABBV said in their cc where they said they have over 20% of the market locked up with exclusive deals (based on GILD comments ABBV has 20% of the 60% or 12% exlusive). I think perhaps there are some plans that have both products on formulary, but v-pak is preferred and ABBV is counting these in the 20%?
- 20% of pts on harvoni thus far have been prescribed 8 week regimen but GILD states that this could increase to as much as 50% as less advanced patients gain access to treatment (personally i think it will never get to 50% - i can see many docs preferring 12 weeks based on the numerical superiority of the SVR rate plus i think this is a bit of a pitch by GILD to payers/PBMs)
I think that cost of a cure is obviously less than what many, including myself, thought it would be. at 46% of WAC average cost of GILD is 50700 or so. i think ABBV is probably offering cost of cure a hair lower (i think GILD needed to get very close to ABBV since efficacy is identical and i jsut don't think insurers who are totally focused on bottom line give a damn about convenience over a 3 month course of therapy). for modeling though i would be conservative and model average US cost of tx for v-pak at 45K (i think abbv will be getting 50K for commercial and 40K govt and the breakdown is likely to be about 50:50 compared to about 65:35 commercial:govt for harvoni - note in 2014 harvoni was 70% commercial and they guided somewhat lower in 2015 but i got a sense i wasn't going to be MUCH lower)
I don't think any of this matters all that much to ENTA in the short term since we already have a good sense of sales from ABBV's call and margins are not a factor in ENTA royalties obviously, but plugging in GILD's estimates for # of pts treated provides another way to get to ABBV sales:
assuming ABBV captures 25% of the GT1 market in the US (conservative considering they have exclusivity and/or preferential formulary position in "over 20%" of the market and 40% of payers negotiations are still ongoing per GILD). if we take the 250K estimate from the GILD call and 75% GT1 then v-pak should be used in .25x188k or 47K patients x 45K per course = over 2.1B in US sales. GILD did 1.5B in HCV sales in the EU last year and guide for a much more significant ramp up this year - but say EU sales are no more than 3B due to budgeting constraints that i mentioned earier, and ABBV doesn't ramp up until H2 of 2015 - then 1.5B is up for grabs between the 2 companies in the back half of the year - i think ABBV can likely get about a third of the market in the EU (based on higher prevalence of GT1b where perhaps the biggest advantage harvoni has over v-pak is negated as no ribavirin is needed for either regimen) - then i think WW sales for v-pak will be 2.1 + .5 = 2.6B in 2015
i think in 2016 v-pak does somewhat better in the US as they are ramped up already and over 1B in the EU so over 4B plus some modest additional revenue from japan
i think in 2017 with a 3rd entrant on the market sales start to drop somewhat with MRK getting 20% of the GT1 market, ABBV 20% (down from 25%) and GILD 60% (down from 75%) - note GILD retains 100% of the non-GT1 market. i think there will only be modest additional pricing pressure
lastly my hunch is that pricing in the EU isn't nearly as discounted relative to the US as it is for other new drugs since we've seen the most aggressive pricing pressure for a new drug ever already play out domestically
