Biotech Values

[Rocky3]

Goldman on ABBV - from Wed,:

ABBV believes there is little to no chance they will end up with only a 10% HCV
market share: We asked why expectations for HCV are so skewed towards GILD., with
Street models reflecting only 10-15% share of the market to GILD’s 90%. Management
continues to point to their strong efficacy data in their Phase 3 trials, and believes that SVR
rates will override convenience. They also stated that investor concerns around RBV may
not be that material. In both ABBV's and GILD's trials the safety and tolerability was not
different with or without RBV. Regarding the sustainability of the market, management
stated that they believe the G7 markets should be sizeable for at least the next 10 years,
and that the market could be $10-$14 bn in size for many years (with a maximum capacity
in the G7 at around 200,000-250,000 patients annually if not a bit higher). While ultimately
there will be pricing pressure with new competitors longer-term, there is certainly an
advantage for ABBV and GILD being first. Management did not back off from a $3-4 bn
projection.
We continue to believe that there is significant upside to Street models for ABBV’s Hep C
franchise, and with the launch expected in 2H14, we expect upside pressure to long-term
forecasts.

As to Merck comp:

Second Gen Hep C competition with MRK: We continue to field pushback on ABBV’s
HepC regimen in part due to competition from MRK’s regimen, despite the limited amount
of value ascribed to shares. We asked ABBV their view of the competition, particularly
from MRK. Regarding timing, ABBV just entered Phase 2 for their next-gen regimen
before the end of 2013 and they are targeting a 2017 launch. This compares to MRK nextgen
launch around 2016. Therefore ABBV will be on the market for around 2 years with
their first gen regimen before MRK launches, and about 6 months behind MRK with their
2nd generation Hep C drug.
ABBV has shown that their next-gen regimen is pan-genotypic (works in G1-G6) in in vitro
studies. We will likely see some of the pre-clinical data this year. MRK is also targeting a
pan-genotypic regimen however MRK has not started a trial in G3 patients (they have
February 26, 2014 AbbVie Inc. (ABBV)
Goldman Sachs Global Investment Research 4
started P2 G1 and G2) – one possibility suggested by ABBV was that the higher dose is
needed for G3 patients but that dose had safety issues.