Biotech Values

[DewDiligence]

GILD/ABBV/ENTA—Others thoughts?

First, GILD’s “See your doctor” DTC campaign to boost HCV awareness is clearly bullish for ABBV/ENTA, as noted in #msg-96800604.

Now, let’s talk about the more important question of valuation. My ENTA valuation model for 2015 (#msg-94993406) has $10.8B of overall GT1 sales in the US and ES, of which GILD would get $6.7B (62%) and ABBV/ENTA would get $4.1B (38%) if there were price parity between the two regimens. If GILD’s regimen has a higher price than ABBV/ENTA’s regimen, GILD’s dollar share of the GT1 market will exceed the 62% volume share, and GILD’s GT1 sales in 2015 would presumably be somewhat higher than the $6.7B figure above—likely in the range of $7.5-8B. Adding in GILD’s US/EU sales in GT2/GT3, where GILD will have a near-100% market share in 2015, one can see that a $10B+ all-in HCV sales number for GILD in 2015 is not inconsistent with my model.

Still, it’s valid to ask: Does GILD’s rapid launch of Sovaldi (without Ledipasvir) justify altering the parameters in my ENTA valuation model? Maybe; however, we still don’t know what price GILD will charge for 8w and 12w regimens of Sovaldi + Ledipasvir in either the US or EU, nor do we know the proportion of patients who will be treated for 8w vs 12w.

All told, I think it’s fair to say that the rapid Sovaldi launch doesn’t justify lowering the bottom-line figure in my ENTA valuation model, but it may justify raising it.