Replies to post #183008 on Biotech Values

[willyw]

One year ago ENTA had no approved drugs, and only one in clinical trials (ABT-450)

As of todays writing ABT 450, could be approved in the next 30-45 days. Gilead seems to have a shorter lead than some had expected, and some less accommodating approvals for some indications than some expected.

ENTA has clinical, some clinical results from the Novartis trial on EDP-239, on safety and efficacy.

ENTA has an antibiotic in Phase 1 trials

You seem to ascribe about 5% share price value to; ABT-493, in Phase 2b trials now.

News on ABT-493 will be revealed in several late breaker AASLD presentations. I have read that we can expect to hear 4 log drop (3 day monotherapy) for 493, and a 4.5 log drop for Abbvies compound; ABT-530.

So my question for you is at what point do you ascribe more value to the 2nd generation compound? What is your thinking on this?

When I look at how IDIX was valued, or how ACHN has increased in value, I perceive that *potential* value seems to be part of others value equation, and in some cases for pre-clinical results.

Thank you for sharing your thinking on valuation.

[DewDiligence]

Re: ENTA valuation model

Remove all value from non-partnered assets

This would barely make any difference. The only value for a non-partnered ENTA asset in my model is $25M for the antibiotic program.

[DewDiligence]

Re: ENTA valuation model

Assume the full tax rate…

That’s what my model does.

[DewDiligence]

Re: ENTA valuation model

A blended royalty rate roughly equivalent to 4.5% of DAA sales.

4.5% is too low, IMO. My model had assumed a net royalty rate of 5% based on a 35% value share for ABT-450, which equated to a gross royalty rate of 14.3%.

However, the 14.3% gross royalty rate I modeled is probably too conservative since the gross-royalty tiers range from “low double digits” to 20% (#msg-107374328). If the average gross royalty is 16.5% (rather than 14.3%), then the net royalty rate after applying ABT-450’s value share is (.165)(.30) = 4.95%, which is barely different from my originally modeled 5%.

[DewDiligence]

Re: ENTA valuation model

Use a 6x [P/E] multiple accepting long tail but allowing for other competitive entrants to take share, including other entries by GILD and/or ABBV/ENTA.

There is as yet no concrete evidence that MRK , BMY, or JNJ can field a competitive regimen; to the contrary, these companies appear to be flailing (with the notable exception of BMY in the Japanese market).

[DewDiligence]

Re: ENTA valuation model (all told)

As detailed in #msg-107391436, #msg-107391843, #msg-107392525, and #msg-107392886, the components of your valuation model are either identical to mine, almost identical to mine, or different in a way that, in my opinion, is hard to justify.

Thanks for posting your numbers, affording the opportunity for readers of the board to discuss them.