Replies to post #177254 on Biotech Values

[jq1234]

If GILD were to lose its mind by pricing sofo/ledi 8-week at $100,000, 12-week at $150,000, there would be much bigger selloff in biotech than we just had. It would bring sustainability of drug price to near term rather than intermediate to long term. On the other hand, it would give ABBV/ENTA even better opportunity pricing wise.

[Rocky3]

What are your own forecasts for these prices?

OK! OK! OK!

I have given this a lot of thought, but I am the first to admit that I really have no competence (or least no confidence) to come up with just a number, so I will give a range. And the range keeps changing. After the GILD conference call, the range went up.

As to GILD, I think that the 8 week cost will control. I think that it will be priced under the current cost of Sovaldi plus the other drugs. According to slide 30 from the CC, the current cost is $94,078. So I think that the 8 week cost of the all oral will be $65,000-$75,000. If you really need one number, it would be the mid-point of $70,000, or $1250/pill. Using the range for the 8 weeks, the range for 12 weeks becomes $97,500-$112,500 - midpoint $105,000 (which is a little less than the current cost of the 48 weeks use of Olysio or Incivek and a lot less than the cost of the combined use of Olysio and Sovaldi, which has been used in about 20% of the case I think).

As to ABBV/ENTA, I am even less sure. ABBV has indicated that they do not plan to buy market share. But the analysis that I have seen claimed that it would maximize income by pricing at a 40-50% discount to GILD. And ABBV must be concerned about the future competition from MRK, etc. If it starts with a low price, does it make it more likely that MRK will price even lower? Of course, the payers are hoping for that kind of price war. I actual think that it is unlikely. So net-net, my range from would be $50,000-$62,000 for ABBV with a midpoint of $56,000, or a 20% discount from the 8 week cost from GILD.

But as I said at the beginning, I don't have a lot of confidence about the numbers. I have a lot more confidence that the market opportunity in 2014 and 2015 will be much larger than anyone has estimated (good for both GILD and ABBV). I disagree with your emphasis that the market is supply constrained - not with 50% of the doctors not having prescribed the drug yet.