Biotech Values

[DewDiligence]

ZGEN/BMY—I would argue that you and some other ex-ZGEN longs have overvalued the Lambda program. This is not to say that Lambda per se is flawed, but rather that Lambda has some warts from a business standpoint that caused BMY and NVO to value the program at a lower (and IMO more realistic) level than some of the posters on this board.

First, Lambda is not the only interferon drug vying to supersede Pegasys and Pegintron in HCV.* Locteron, a Pegasys biosimilar, is further advanced than Lambda and is backed by the well-financed venture, Biolex. It’s likely that other Pegasys biosimilars will enter the market during the current decade, pressuring prices for all of the HCV interferons. In short, the notion that Lambda will usurp the sales now shared by Pegasys and Pegintron without a fight strikes me as naïve.

Moreover, the pricing of interferon drugs in the Age Of Telaprevir will have some problems. Many patients will need only 24 weeks of interferon, which is half as long as the current regimen for genotype-1 patients. However, the completed clinical trials from VRTX and MRK have conclusively shown that some patients (including most or all patients in the second-line setting) will continue to need 48 weeks of interferon when the regimen consists of only one direct antiviral. Since Lambda won’t be able to have separate price points for 24-week and 48-week regimens, it will presumably be priced at the (lower) per-dose level that assures reimbursement in 48-week regimens.

All told, even if you think all-oral regimens in HCV are a long way off, there is an array of pitfalls lurking in the Lambda program. When properly analyzed, the notion that BMY is substantially underpaying for ZGEN does not hold water.

*The market for Lambda in HBV has weak prospects for reasons I previously posted and does not warrant further discussion, IMO.