Replies to post #478 on Biotech Values

[DewDiligence]

$6B market potential?

Jason Kantor’s $2B estimate for the market potential of drugs for wet AMD is almost certainly understated. If I had to pick a number, I would say the market potential is about $6B. Here’s why:

There are 500,000 new worldwide diagnoses of wet AMD each year. Almost all of these diagnoses are in the so-called developed world where patients can be expected to afford to pay for treatment out-of-pocket or via healthcare reimbursement.

If we assume a modest weighted-average treatment price of $5,000 per patient (comparable to the price of an individual Visudyne treatment), we get an addressable market of $2.5B per year just for the initial treatment of each patient.

Unlike some pharmaceutical markets such as cancer (where many patients die or quickly become refractory to a given therapy), the AMD market offers the opportunity to retreat patients. As long as an AMD therapy remains effective at retarding the growth of abnormal blood vessels, it is likely to have value in arresting further deterioration of vision. Therefore, in wet AMD, it is not unreasonable to suppose that the addressable market for retreating patients is at least as large as –and possibly much larger than-- the market for initial treatments.

If we make the conservative assumption that patients receive one retreatment on average, then the retreatment market is roughly the same size as the initial-treatment market, and we can double the $2.5B figure above to get $5B.

Now let’s consider the pool of patients who already have clinically significant wet AMD and are not being adequately treated or treated at all. In many countries including the U.S., Visudyne is approved only for a fraction of wet AMD patients (those with minimally-classic disease). Since many of these untreated patients are in the U.S., this patient pool might add as much as another $1B to the market size, bringing the total addressable market to perhaps $6B.

Whatever the actual number, it is clear that the wet AMD market is very large and, compared to other diseases, there are relatively few drug companies competing for this business.

Huge unmet medical need, high likelihood for reimbursement, relatively little competition… what else could an investor ask for?