Replies to post #186916 on Biotech Values

[Rocky3]

I'm back from 2 weeks in Ethiopia so have missed a lot.

So some general comments on what I have been able to get so far:

1) IMS/Bloomberg script numbers: Clearly V-Pak numbers are not being reported by IMS and are underreported by Bloomberg. Part of the reason is known to be the ESPX contract but probably also due to usaage by payors outside normal reporting - VA, prisons, etc. What is unknown is whether Sov/Har reporting is also being underreported due to contractual provisions too. One reason to think so is that Bloomberg numbers are higher than IMS numbers for first time since Sovaldi launch. Obviously the percentages for underreporting for V-Pak are huge (>150% for Bloomberg and >300% for IMS) and percentage for Sov/Hav would be more like 10-20%, but absolute numbers underreported would probably be higher for Sov/Har.

2) 1100 scripts for V-Pak for first 4 weeks is pretty good, but still minute compared to the 14-15K new scripts reported (probably significantly underreported) for Sov/Hav for same time period. V-Pak scripts should continue continue to accelerate and Sov/Har should level off or decline, but real market share gain (>25%) for V-Pak should only occur late in the year when EU finally are meaningful.

3) ABBV guidance - I agree with DD that guidance should be easy to beat, but guidance does imply "only" low $2B sales in '15. Since I think EU sales will probably be main source of revenue and will not start in volume until late '15 and continue to ramp into '16 and '17, I think the previous ABBV estimates of $3B V-Pak sales in '15 are unlikely.

4) ENTA valuation - with very slow pick of V-Pak scripts in '15, I think that pressure on price will continue. I bought some today, replacing some sold last June at around same price. Much more was sold recently are high 40s and low 50s. I plan on buying those back at lower prices if we get there. Mid-term (1-2 years) ENTA should be higher with EU (and probably) Japan sales picking up. Risk is of course Medivir type sales due to competitive products in '16 and beyond (same risk as applies to GILD of course).

All of above based on script info to date and known issues.

Tomorrow's GILD report unlikely to change much, but Q1 earnings for everyone might and Q2 earnings should give much more knowledge of real size of on-going market.

JMO.

[Rocky3]

From Wells:

**Harvoni/Sovaldi IMS data weekended
1/30/15 was released and show Harvoni volumes accelerating, with Sovaldi
remaining in steady state.
**Harvoni NRx are up to 3,781 from last week's 3,627, an increase of 4.2%. We believe this reflects increasing access and
expect this to continue to rise over the next several weeks as additional insurance formularies come online following price
negotiations.
**Sovaldi Rx remain in steady state (NRx 771, TRx 1,941), continuing to suggest an equilibrium and that with our belief
Sovaldi is now being used almost exclusively for GT2/
3 patients, the product's runrate
in the U.S. is approximately $3B.
**Assuming modest (1.5%) weekoverweek
increases in Harvoni new patient starts for the rest of the quarter then some
modest weekly declines throughout the rest of the year due to competition and the initial bolus being worked through, our
scripsbased
projector suggests 2015 U.S. Harvoni sales of $8.6B. Adding the projected U.S. Sovaldi sales of $3.1B and exU.
S. total HCV sales of $3.2B, fullyear
HCV sales appear to be tracking at around $15Bwe
believe at or above consensus,
and illustrating how the increases in prescription volume can help offset the greaterthanexpected
average discounts.
**BOTTOM LINE: Acceleration of Harvoni prescriptions illustrates how volumes should help GILD offset the greaterthanexpected
gross/net and enable fullyear
HCV sales to meet/beat consensus and guidance, even if the greaterthanexpected
discounting does suggests such volumes will need to be sustained longterm
to enable continued robust sales. With large
pharmas having similar modest (4-6%)
EPS growth rates to GILD (AZN, GSK, JNJ) trading at a mean 16.5x, and minimal
credit given to GILD's pipeline, we believe at a substantially discounted 9.8x multiple GILD looks relatively undervalued even
with the longterm
HCV uncertainties.

My comment - both TRx and NRx numbers for total HCV are new highs, even with better competition. Still amazed Olysio has held up so well (NRx as not really declined for weeks) with new all-orals around. Don't get it.