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Replies to post #178976 on Biotech Values
Updating - from 4/23 reports on $GILD from Wells, Goldman, Credit Swisse, RBC, BMO, Stifel, JPM, Nomura, Citi, UBS, Maxim, Jefferies, Deutsche Bank (adding earnings estimates for Maxim, Jefferies, and Deutsche Bank):
Goldman
Sovaldi sales: '14-10.4B; '15-10.9B; '16-10.1B; '17-10.7B
Earnings: '14-$6.25/sh; '15-$6.36/sh; '16-$6.61sh; '17-$7.40/sh
Credit Swisse
HCV franchise sales: '14-9.1B; '15-9.7B; '16-12.6B; '17-13.2B; '18-12.0B; '19-10.65B; '20-9.4B
Earnings: '14-$6.52/sh; '15-$6.56/sh; '16-$7.85/sh; '17-$8.51; '18-$6.80/sh; '19-$6.32; '20-$5.89
Wells Fargo
HCV regimens: '14-9.4B; '15-11.7B; '16-12.6B; '17-12.7B; '18-13.9B
Earnings; '14-$6.55/sh; '15-$7.57/sh; '16-$8.67/sh; '17-$9.78/sh; '18-$9.38
RBC
HCV: '14-9.5B; '15-11.5B; '16-9.9B
Earnings: '14-$6.15/sh; '15-$7.00; '16-$7.18
BMO
HCV: '14-8.075B; '15-8.819B; '16-9.854B; '17-10.662B; '18-11.579B; '19-12.579B; '20-13.702B
Earnings: '14-$5.98/sh; '15-$6.25/sh; '16-$7.00/sh; '17-$7.77; '18-$8.35/sh; '19-$9.08/sh; '20-$9.87/sh
Stifel
HCV: '14-11.865B; '15-14.723B; '16-14.946B; '17-15.418B
Earnings: '14-$6.80/sh; '15-$7.24/sh; '16-$7.98/sh; '17-$9.20/sh
JP Morgan
Sovaldi: '14 - 8.336B; '15 - 9.488B; '16 - 10.724B
Earnings: '14 - $5.61/sh; '15 - $6.52/sh; '16 - $7.54/sh
Nomura
Hep C: '14 - 9.092B; '15 - 12.599B; '16 - 15.131B; '17 - 15.736B; '18 - 15.830B; '19 - 15.037B; '20 - 14.453B
Earnings: '14 - $5.01/sh; '15 - $7.24/sh; '16 - $8.92/sh; '17 - $9.83/sh; '18 - $10.45/sh; '19 - $10.25/sh; '20 - $10.15/sh
Citi
Sovaldi; '14 - 9.4B
Earnings: '14 - $6.29/sh; '15 - $7.71
UBS
HCV: '14 - 8.478B; '15 - 11.211B; '16 - 13.721B
Earnings - '14 - $6.26/sh; '15 -$7.90/sh; '16 - $9.58; '17 - $11.14; '18 - $11.57/sh
Maxim
HCV: '14 - 12.624B; '15 - 15.516B; '16 - 19.041B; '17 - 20.716B
Earnings: '14 - $7.27/sh; '15 - $9.06/sh; '16 - $11.56/sh; '17 - $12.98
Jefferies
HCV: '14 - 9.548B; '15 - 12.282B; '16 - 17.174; '17 - 17.855
Earnings; '14 - $6.04/sh; '15 - $7.69/sh; '16 - $11.19/sh; '17 - $12.07
Deutsche Bank
Sov: '14 - 10.638B; '15 - 14.596B; '16 - 16.599B; '17 - 17.528B; '18 - 15.720B; '19 - 14.787B; '20 - 14.822; '21 - 14.825; '22 - 14.506B; '23 - 13.702B; '24 - 13.702B; '25 - 12.275B; '26 - 12.850B; '27 - 12.415B
Earnings: '14 - $6.65/sh; '15 - $9.76/sh; '16 - $11.74/sh; '17 - $13.27/sh; '18 - $13.12/sh; '19 - $12.99/sh; '20 - $13.92/sh; '21 - $14.34/sh; '22 - $14.28/sh; '23 - $13.81/sh; '24 - $14.04/sh; '25 - $14.42; '26 - $14.08/sh; '27 - $15.04
Other comments (summarized by me):
Goldman - (1) I previously posted primary bear case based mostly on sustainability; (2) out year per share increases are due to lower share counts from share repurchases: (3) models cost of all-oral at $95,000; (4) suggests stocking at $400M; (5) target $65
Credit Swisse - (1) likely price of all-oral at $100K for 8 week regimen; (2) suggest a 65% steady state market share for GILD; (3) breaks down HCV '14 sales into $7.6B for Sovaldi and $1.5B for all-oral; (4) target $110
Wells Fargo - (1) Thinks Medicaid share will go up during year, so selling price per RX will go down; (2) expects more warehousing of milder patients until all-oral available; (3) think GILD will price all-oral close to parity with Sovaldi with 12 week price at $90-100K; (4) breaks down '14 sales into $8.6B US, $.7B Europe, and .1B int'l; (5) target $87-$91
RBC - (1) If HVC cut in half from $12 to $6B by '18, still will earn $5-6/sh and a 12-14 p/e gets a value of $60-84; (2) Sees HCV sales $8B+ due to longer tail; (3) estimated inventory build at $400M; (4) If scripts up 50% and inventory flat then US in Q2 at $2.2B and ROW at $.3B for $2.5B total; (5) Base case of $96 is based on 30% of DCF of HIV ($25/sh), HCV ($45/sh), oncology ($7/sh), and synergies ($5/sh) and 70% P/E value of $99; (6) assumes HIV 80% maintenance post '18; (7) has upside and downside scenerios - upside is $110 on higher p/e and higher HCV sales, as well as HBV and other pipelines; (8) downside is $62, based on lower HCV share ($36/sh) and lower sustainability of HIV ($21/sh)
BMO -(1) price target of $123 (20 x $7.00, discounted @ 20%); (2) Q2 Sov sales @ 1,831
Stifel - (1) increases estimate of all-oral pricing to average of $94,000; (2) has cost of 8 week treatment at $90,000 with only 10% of patients needing 12 week treatment at 50% higher cost, (3) target price of $92 determined by taking 1.27 PEG (median of peer group) times 11% growth rate for'14-'17 for 14p/e times '14 earnings of 6.80 (result is a 11 p/e based on the '15 earnings estimate, below pharma norm of 15x); and (4) HCV sales divided between Sov and all-oral and between US and non-US - non-US at '14-1.985B; '15-2.602B; '16-2.563B; '17-2.590B
JP Morgan - (1) Q2 est $1.32/sh; (2) delays in patient starts positively impacts sustainability; (3) payer criticism should diminish after approval of all-oral; (4) major acceleration ahead in all-oral; (5) non US should provide material upside EU (2H'14/'15), Japan with GT2 filing in '14 ('15), Australia/Brazil/Turkey/Russia/China/Canada ('15-'18); (6) Target of $100/sh
Nomura - (1) "based upon conversation with management," pricing for 8 weeks could come in at $84K ($75K net), with a 12 wk course for cirrhotic at $125K ($107K net); (2) 8 wk treatment for most patients; (3) Q2 Sovaldi est. $1.765B and earnings est at $1.26; target at $130/sh
Citi - (1) earnings "at least $8-10/sh from '15 onwards," with no decrease; (2) target at $96/sh
UBS (from 4/30 report) - (1) market assumes significant tail risk to HCV, lack of cash management, and minimal pipeline contribution; (2) pipeline is significantly undervalued (emphasizes simtuzumab); (3) target of $110
Maxim (from 4/28 report) - (1) Price target of $112 based average of sum-of-the parts ($97), FCF ($126), and discounted EPS ($113); (2) sum of the parts analysis has HIV franchise at $33/sh and HCV franchise at $54+/sh; (3) has EU HCV sales almost as high as US - $7B vs $8B in '17 (and Japan over $5B in '17); (4) has $9.1B US sales in '14 - highest level of US sales with decreases going forward
Jefferies (from 5/28 report, but seems to be based on April report) - (1) estimates for remaining quarters in '14 are $2.912B, $1.758B, and $2.602B for Sov; (2) target is $82
Deutsche Bank (from 5/28 report) - (1) estimates for remaining quarters in '14 are $3.2B, $2.5B, and $2.7B for Sov; (2) target raised to $142 based on 14.5 times '15 estimate; (3) pipleline could be worth $47/sh
Updating - from 4/23 reports on $GILD from Wells, Goldman, Credit Swisse, RBC, BMO, Stifel, JPM, Nomura, Citi, UBS, Maxim, Jefferies, Deutsche Bank (adding earnings estimates for Maxim, Jefferies, and Deutsche Bank):
Goldman
Sovaldi sales: '14-10.4B; '15-10.9B; '16-10.1B; '17-10.7B
Earnings: '14-$6.25/sh; '15-$6.36/sh; '16-$6.61sh; '17-$7.40/sh
Credit Swisse
HCV franchise sales: '14-9.1B; '15-9.7B; '16-12.6B; '17-13.2B; '18-12.0B; '19-10.65B; '20-9.4B
Earnings: '14-$6.52/sh; '15-$6.56/sh; '16-$7.85/sh; '17-$8.51; '18-$6.80/sh; '19-$6.32; '20-$5.89
Wells Fargo
HCV regimens: '14-9.4B; '15-11.7B; '16-12.6B; '17-12.7B; '18-13.9B
Earnings; '14-$6.55/sh; '15-$7.57/sh; '16-$8.67/sh; '17-$9.78/sh; '18-$9.38
RBC
HCV: '14-9.5B; '15-11.5B; '16-9.9B
Earnings: '14-$6.15/sh; '15-$7.00; '16-$7.18
BMO
HCV: '14-8.075B; '15-8.819B; '16-9.854B; '17-10.662B; '18-11.579B; '19-12.579B; '20-13.702B
Earnings: '14-$5.98/sh; '15-$6.25/sh; '16-$7.00/sh; '17-$7.77; '18-$8.35/sh; '19-$9.08/sh; '20-$9.87/sh
Stifel
HCV: '14-11.865B; '15-14.723B; '16-14.946B; '17-15.418B
Earnings: '14-$6.80/sh; '15-$7.24/sh; '16-$7.98/sh; '17-$9.20/sh
JP Morgan
Sovaldi: '14 - 8.336B; '15 - 9.488B; '16 - 10.724B
Earnings: '14 - $5.61/sh; '15 - $6.52/sh; '16 - $7.54/sh
Nomura
Hep C: '14 - 9.092B; '15 - 12.599B; '16 - 15.131B; '17 - 15.736B; '18 - 15.830B; '19 - 15.037B; '20 - 14.453B
Earnings: '14 - $5.01/sh; '15 - $7.24/sh; '16 - $8.92/sh; '17 - $9.83/sh; '18 - $10.45/sh; '19 - $10.25/sh; '20 - $10.15/sh
Citi
Sovaldi; '14 - 9.4B
Earnings: '14 - $6.29/sh; '15 - $7.71
UBS
HCV: '14 - 8.478B; '15 - 11.211B; '16 - 13.721B
Earnings - '14 - $6.26/sh; '15 -$7.90/sh; '16 - $9.58; '17 - $11.14; '18 - $11.57/sh
Maxim
HCV: '14 - 12.624B; '15 - 15.516B; '16 - 19.041B; '17 - 20.716B
Earnings: '14 - $7.27/sh; '15 - $9.06/sh; '16 - $11.56/sh; '17 - $12.98
Jefferies
HCV: '14 - 9.548B; '15 - 12.282B; '16 - 17.174; '17 - 17.855
Earnings; '14 - $6.04/sh; '15 - $7.69/sh; '16 - $11.19/sh; '17 - $12.07
Deutsche Bank
Sov: '14 - 10.638B; '15 - 14.596B; '16 - 16.599B; '17 - 17.528B; '18 - 15.720B; '19 - 14.787B; '20 - 14.822; '21 - 14.825; '22 - 14.506B; '23 - 13.702B; '24 - 13.702B; '25 - 12.275B; '26 - 12.850B; '27 - 12.415B
Earnings: '14 - $6.65/sh; '15 - $9.76/sh; '16 - $11.74/sh; '17 - $13.27/sh; '18 - $13.12/sh; '19 - $12.99/sh; '20 - $13.92/sh; '21 - $14.34/sh; '22 - $14.28/sh; '23 - $13.81/sh; '24 - $14.04/sh; '25 - $14.42; '26 - $14.08/sh; '27 - $15.04
Other comments (summarized by me):
Goldman - (1) I previously posted primary bear case based mostly on sustainability; (2) out year per share increases are due to lower share counts from share repurchases: (3) models cost of all-oral at $95,000; (4) suggests stocking at $400M; (5) target $65
Credit Swisse - (1) likely price of all-oral at $100K for 8 week regimen; (2) suggest a 65% steady state market share for GILD; (3) breaks down HCV '14 sales into $7.6B for Sovaldi and $1.5B for all-oral; (4) target $110
Wells Fargo - (1) Thinks Medicaid share will go up during year, so selling price per RX will go down; (2) expects more warehousing of milder patients until all-oral available; (3) think GILD will price all-oral close to parity with Sovaldi with 12 week price at $90-100K; (4) breaks down '14 sales into $8.6B US, $.7B Europe, and .1B int'l; (5) target $87-$91
RBC - (1) If HVC cut in half from $12 to $6B by '18, still will earn $5-6/sh and a 12-14 p/e gets a value of $60-84; (2) Sees HCV sales $8B+ due to longer tail; (3) estimated inventory build at $400M; (4) If scripts up 50% and inventory flat then US in Q2 at $2.2B and ROW at $.3B for $2.5B total; (5) Base case of $96 is based on 30% of DCF of HIV ($25/sh), HCV ($45/sh), oncology ($7/sh), and synergies ($5/sh) and 70% P/E value of $99; (6) assumes HIV 80% maintenance post '18; (7) has upside and downside scenerios - upside is $110 on higher p/e and higher HCV sales, as well as HBV and other pipelines; (8) downside is $62, based on lower HCV share ($36/sh) and lower sustainability of HIV ($21/sh)
BMO -(1) price target of $123 (20 x $7.00, discounted @ 20%); (2) Q2 Sov sales @ 1,831
Stifel - (1) increases estimate of all-oral pricing to average of $94,000; (2) has cost of 8 week treatment at $90,000 with only 10% of patients needing 12 week treatment at 50% higher cost, (3) target price of $92 determined by taking 1.27 PEG (median of peer group) times 11% growth rate for'14-'17 for 14p/e times '14 earnings of 6.80 (result is a 11 p/e based on the '15 earnings estimate, below pharma norm of 15x); and (4) HCV sales divided between Sov and all-oral and between US and non-US - non-US at '14-1.985B; '15-2.602B; '16-2.563B; '17-2.590B
JP Morgan - (1) Q2 est $1.32/sh; (2) delays in patient starts positively impacts sustainability; (3) payer criticism should diminish after approval of all-oral; (4) major acceleration ahead in all-oral; (5) non US should provide material upside EU (2H'14/'15), Japan with GT2 filing in '14 ('15), Australia/Brazil/Turkey/Russia/China/Canada ('15-'18); (6) Target of $100/sh
Nomura - (1) "based upon conversation with management," pricing for 8 weeks could come in at $84K ($75K net), with a 12 wk course for cirrhotic at $125K ($107K net); (2) 8 wk treatment for most patients; (3) Q2 Sovaldi est. $1.765B and earnings est at $1.26; target at $130/sh
Citi - (1) earnings "at least $8-10/sh from '15 onwards," with no decrease; (2) target at $96/sh
UBS (from 4/30 report) - (1) market assumes significant tail risk to HCV, lack of cash management, and minimal pipeline contribution; (2) pipeline is significantly undervalued (emphasizes simtuzumab); (3) target of $110
Maxim (from 4/28 report) - (1) Price target of $112 based average of sum-of-the parts ($97), FCF ($126), and discounted EPS ($113); (2) sum of the parts analysis has HIV franchise at $33/sh and HCV franchise at $54+/sh; (3) has EU HCV sales almost as high as US - $7B vs $8B in '17 (and Japan over $5B in '17); (4) has $9.1B US sales in '14 - highest level of US sales with decreases going forward
Jefferies (from 5/28 report, but seems to be based on April report) - (1) estimates for remaining quarters in '14 are $2.912B, $1.758B, and $2.602B for Sov; (2) target is $82
Deutsche Bank (from 5/28 report) - (1) estimates for remaining quarters in '14 are $3.2B, $2.5B, and $2.7B for Sov; (2) target raised to $142 based on 14.5 times '15 estimate; (3) pipleline could be worth $47/sh
AI
