Biotech Values

[iwfal]

The 'stuffing' or inventory that we are referring to is not held by NVS, it is held by every retail pharmacy or benefit manager located throughout the U.S.

If they have sales of around $1 Bil/year, I would think something in the 5x turnover would be appropriate.

First, I should point out that there is no question that everyone on the board knows that channel stuffing is NOT about NVS inventory. That said, you bring up the good point that the channel includes both the wholesaler and the retailer.

Wholesaler: Based upon industry stats wholesalers typically have about 3.5 weeks of inventory (see AmerisourceBergen BS for example) - but I'd expect a lot better inventory turns on high volume drugs. E.g. even Recothrom, a fairly low volume drug, had about 3 weeks in wholesalers. So guesstimate about 2 to 2.5 weeks of inventory in wholesalers for a drug with as much volume as lovenox.

Retailer: Per the link at the bottom of the page the average inventory turns for the Rx portion of the independent pharmacy group is about 4.5 weeks. But I'd expect two adjustments:

a) Undoubtedly the big national chains do a better job managing inventory
b) Again, with a high volume product I'd expect inventory turns to look a lot better.

Thus I'd expect inventory turns at retail (or hospital) to average more like 3 weeks.

Altogether perhaps 5 to 6 weeks would be my guess as to total inventory in the distribution chain for a drug like lovenox. And I'd lean toward the low side. In any case nowhere near 5x per year.

http://www.ncpanet.org/pdf/sampleccr2008.pdf