Replies to post #137952 on Biotech Values

[ghmm]

Just to follow up on the TMC435 royalty

Page 27 of the 2010 annual report (right column 2nd paragraph)
http://www.medivir.se/v4/en/ir_media/financial_reports.cfm

Didn't find the mention about the other possible royalty (IF I recall correctly that was more vague and may have been specific to a certain asset(s)).

[mcbio]

I am leaving out the Nordic countries (perhaps unfair but I see even if its just a 5% royalty on ROW much more valuable than 100% of Nordic). First they will need to build up infrastructure so it won't be as profitable. My guess is its also a much smaller market. Even if we go by the figure 3K seek treatment how likely is it that they will get 100% of that market?

Medivir recently acquired another Nordic company, BioPhausia, in large part due to their existing commercial infrastructure with an eye towards using it as a platform to launch TMC435.

On point of number of patients treated annually in Nordic countries (3K), I doubt that figure incorporates the recent launch of telaprevir and boceprevir. One would expect the market to expand with the advent of the oral HCV drugs, in particular TMC435, if it reaches market, given its advantages over the first gen PIs (greater potency, QD dosing, etc.). So, even though TMC435 certainly won't get 100% of that market, one would expect it to be a much greater market, in terms of actual patients treated, in the coming years.

Now on the ROW. This will be the third PI to research market and their is already a conflict of interest with J&J. Who knows how hard they will sell it in different territories and if Vertex regains rights and gets more competitive?

Third PI, sure, but there are pretty obvious advantages for TMC435 over the first two (again, potency, QD dosing, etc.). And if these advantages are borne out in the Phase 3 trials with no safety issues, it would be surprising to me if JNJ continued to favor an inferior PI over a superior one in an uber-competitive HCV space. You don't see telaprevir being tested in combo with GS7977, do you?

Since they are pretty hush about the terms I also would prepare for the worst.

I absolutely agree with you on this. I'm inclined to believe Medivir will only get single-digit royalties on TMC435 given the silence. I have seen them disclose the fact that they are due double-digit royalties on other drugs partnered in their pipeline, so I agree skepticism is warranted here.

I am not saying the company may not be an interesting buy but I generally like to buy a company seeing how near a company is to profitability. I am not so sure TMC435 can get them there. If it can I think it would be just modestly profitable. I didn't look as much at other products to get a sense for how far away those may be to reaching market. It seems most of their pipeline is partnered which is good and bad. Part of the attraction to them obviously is getting another of these big partnerships/buyouts that has happened lately. I came away thinking this may have a very low probability.

I also absolutely agree with you that a buyout is unlikely given that what I view as by far their key asset is already partnered. (I'd love to be proven wrong and I guess it's possible that JNJ could outright acquire them; but I'll be surprised if they get a buyout offer.)

I obviously disagree with you on the impact that TMC435 can have on Medivir's profitability and its share price. Also, the questions on the royalty rate due Medivir on TMC435 have presumably been around and on the table since they inked the deal with Tibotec in 2004. And note that the ADRs were at almost two and a half times the current level just in May 2011. Obviously, any concerns over their royalty rate were on the table at that time as well. So, I'm inclined to believe that the weakness in share price is due more to the Euro crisis and perhaps questions on the combinability of a PI+nuke given IDIX's issues and not due to concerns over the royalty rate Medivir is due on TMC435.