Biotech Values

[DewDiligence]

IDIX – Here’s my rebuttal of Werber’s report:

>U.S. Launch: We expect Idenix and partner Novartis to launch Tyzeka within the next 30 days. Idenix and Novartis have established a sales force of 35-40 reps to promote Tyzeka in the U.S. Recall that Idenix and Novartis will share equally in the profits from Tyzeka sales in the U.S.<

No analysis or opinion here—the above details are exactly as disclosed by IDIX. Werber neglects to mention, however, that IDIX hired several senior HBV sales reps from competitors such as BMY. (I wonder why these senior reps would switch to a team selling a drug that has such limited potential as Tyzeka??)

>Based on our checks, we do not believe that Tyzeka will be a strong player in the HBV market due to lower potency than Bristol-Myers Squibb's Baraclude and higher viral resistance profile than Baraclude or Gilead's Hepsera.<

Resistance rates for Tyzeka are in the low single digits after two years of therapy, rendering this all but a non-issue. Baraclude’s food interaction (#msg-14353425, paragraph 8) is probably of greater consequence. As for Hepsera, it does have a good resistance profile but this is mostly irrelevant because Hepsera has second-rate efficacy (#msg-14364568).

>The HBV market is also a small commercial opportunity and the recent launch of Baraclude, a best-in-class product, has been lackluster.<

Despite the “crowding,” HBV sales are rising rapidly in the U.S and Europe as new drugs expand the market rather than just stealing share from older drugs. Werber evidently hasn’t seen—or hasn’t understood—the chart in #msg-14364718.

>Given the slow launch of Baraclude following its approval by the FDA in March 2005, we forecast modest sales for Tyzeka. Baraclude sales in the U.S. were $11 million in 2005, and we forecast sales growing to $47 million in 2006 and $95 million by 2008.<

These numbers are obviously much too low. Baraclude sold $22M in 3Q06, a 57% jump from 2Q06 (#msg-14306480). Moreover, the 3Q06 sales figure included only a partial quarter of sales from the UK, France, and Germany, and no sales from Spain and Italy, which are large HBV markets.

>Our 2007 and 2008 estimates for Tyzeka are $11 million and $28 million, respectively.<

This is ludicrous, unless you believe that NVS and IDIX have absolutely no idea what they are doing.

>In addition, we believe that NM283 is not potent enough to become a strong seller in the HCV market. At the present time, the outlook for NM283 is also uncertain since the drug has not established safety when dosed with ribavirin yet. The drug/drug interaction studies with ribavirin have recently commenced, and data are expected in H1:07. If positive, this will lead to a lengthy phase III program.<

The word lengthy in this context is just anti-IDIX propaganda—NM283’s phase-3 program will not be any more lengthy than any other phase-3 program in this indication. Moreover, Werber neglects to mention that NM283 is closer to starting phase-3 than any other direct-antiviral drug for HCV including VRTX’s VX-950.

>Thus, we continue to hold a cautious view on the stock. However, we maintain our Hold rating since we think our concerns are largely reflected at the current stock price (trading at 2.6x cash).<

LMAO—after all that, Werber does not even think the stock is overpriced! That says it all.