Replies to post #113645 on Biotech Values

[iwfal]

Yet in the basis of this conversation you are saying they wouldn't have their inventories under control after the first 14 weeks of rollout.

You are confused about how control loops work. When I took systems engineering in college I am reasonably sure some of the problems in settling time were about inventory adjustment - and certainly there are whole papers on it and how to speed it up because it takes so long and is fraught with risk.

[dewophile]

jbog - there were 9 weeks, not 14 weeks in Q3 to manage inventory so that there would be no effect in Q4. we also know that hospitals and retailers had to work down their own inventory before they bought from wholesalers. script share data corroborates this, as sales in the last 4 weeks were 30% more than sales in the first 5+ weeks, so working back it clearly took time to work down inventory at retail level, and only then could wholesalers begin to unload their stock to an appreciable degree (and there is no reason to think hospital pharmacies performed differently - particularly in this case where we kinda know erosion in retail was more accelerated than hospital (per SNY). so all in all i think it's a stretch to assume inventory reached steady state by end of Q3

while i am not that knowledgeable in this area, i did live through this once before with recothrom, so i know how inventory can negatively affect reported sales. in Q4 2009 zgen sold 9.2M of recothrom. in Q1 2010 they reported 9M of sales - 2% less that the prior quarter, despite end user demand increasing 14%. so a negative 16% effect from inventory on sales. this too was for a product shortly after launch, but not a situation where they purposefully intended to overstuff the channel in case another competitor entered the market (NVS admits to higher inventory stocking in case another generic was approved), so it's not a stretch for me to think there was an even larger inventory effect in this case

supportive evidence again comes from simple arithmetic - 40% of the market discounted 15% is well over 170M. so either NVS is wrong and they don't have 40% of themarket (something hard to imagine since SNY even admitted to losing 33% market by volume and more than that by dollar sales in Q3 - which makes sense since margins in hospitals historically lower where they kept higher market share), or discounting would have to be on the order of 35-40% (again something hard to imagine given initial pricing was at a 14% discount and MNTA has stated there has not been significant pricing pressure - and why would there be in a duopoly situation)

the one piece of evidence supporting your contention is jeff george's answer during Q&A - where he hemmed and hawed to the tune of yes 40%, 56-57M per month, that's about right

i agree with your last statement time will tell. SNY provided a good amount of data in their Q3 call on US lovenox dynamics, so hopefully in a little over a week we'll get a better sense