Replies to post #176674 on Biotech Values

[Rocky3]

On MRK vs. ABBV for second place, from Wells yeasterday:

**We are attending the EASL conference in London UK, where Merck has just press-released additional data from its CWORTHY
study of '5172 and '8742 in genotype 1 Hep C.
**Our thesis regarding hep C competitive dynamics is that AbbVie's regimen may be underappreciated as a competitor to
GILD, given its efficacy across multiple patient types and clean safety (though it still has some disadvantages versus
GILD), but that Merck's regimen may be over-hyped as a potential competitive threat-- given intrinsic potency limitations
of a nuc-free PI/NS5a regimen, the narrower therapeutic window of Merck's PI, and breakthroughs that have already
been observed, all of which we think will make it difficult for Merck's regimen to look as competitive with GILD across the
broadest range of patients and treatment durations.
**We believe today's data supports our thesis. While SVRs with 12-week dosing in genotype 1 treatment-naïve patients
were an impressive 94-98%, including without RBV, with 8 week of treatment the SVR rate was a less competitive 83%.
We believe this is indicative of the limitations MRK will ultimately have versus more potent nuc-based or triple DAA
regimens ''stretched''.
**Additionally, we note a patient on the go-forward dose of Merck's PI (plus interferon) experienced elevated LFTs and
bilirubin; while it is unclear whether this is a drug-related effect, as HCV patients can have such elevations and the patient
was drinking alcohol, we believe it warrants some degree of cautiousness given the history of liver tox associated with
higher doses of the PI.
**BOTTOM LINE: We believe this data supports our view that Merck is less important as a future competitive threat to
Gilead, and that the Street may be overestimating the likelihood of this becoming an interchangeable three or four
handed all-oral HCV market in the next three years.

[DewDiligence]

…Merck's all-oral cocktail posted a 12-week cure rate of 98% in genotype 1 patients…

As previously noted (#msg-100393061), the headline number for MRK’s phase-2 results in treatment-naïve non-cirrhotic GT1 patients should be 95% (not 98%).

…leading ISI's Mark Schoenebaum to speculate that peak estimates for the drug could rise as high as $3.2 billion and Citi analyst Yaron Werber to pencil the company [MRK] in for an eventual second-place spot behind Gilead. Merck's apparent leapfrogging is in part due to convenience: Like Gilead's fixed-dose combo, the MK-5172/MK-8742 cocktail is a once-a-day treatment.

With all due respect to Mr. Schoenebaum and Mr. Werber, I think it’s grossly premature to label MRK as the #2 HCV player based on the pill count argument, which third-party payers don’t seem to care about.

[jq1234]

>> promising data from latecomer Merck have analysts relegating the Illinois company to third place despite some excellent late-stage results.

Well, I guess analysts are jumping ahead of themselves again, repeating the mistake they made with GILD by projecting an almost monopoly of hundreds of billions of dollars in short period of time on HCV because of better convenience from similar SVR and safety while unable to foresee potential pricing issue from an indication where majority of patients are on public healthcare. I thought GS provided one of better reports on HCV the other day by taking all things in consideration, SVR, pricing, as well as safety and convenience.