Replies to post #162890 on Biotech Values

[DewDiligence]

Just bought first shares of ENTA at $17.58 (eom).

[DewDiligence]

ENTA has requested confidential treatment from the SEC for the 2/16/13 amendment to the collaboration with NVS on EDP-239:

http://www.sec.gov/Archives/edgar/data/1177648/999999999713011210/filename1.pdf

http://www.sec.gov/Archives/edgar/data/1177648/000119312513220330/d511424dex102.htm

Due to the redactions, I can’t tell whether the amendment is good or bad for ENTA; however, I’ve ascribed zero value for ENTA’s partnership with NVS (#msg-89280314), so anything that comes of it is pure upside, as far I’m concerned.

[DewDiligence]

(ENTA)—Blurb from ABBV’s GS webcast about speed of enrollment in phase-3 HCV trials (from 6/13/13):

http://seekingalpha.com/article/1501302-abbvie-s-management-presents-at-goldman-sachs-34th-annual-global-healthcare-conference-transcript

Jami Rubin (GS analyst): How is the Phase 3 enrollment going and when will we start to see that data read out?

William Chase (CFO): …let me just say we are extremely pleased with the way enrollment is going. I have been in Abbott [AbbVie] for 16 years, I was involved in HIV development at a time when patients were looking for those therapies. I have never seen things enroll this quickly. We are on track for a mid- 2014 [NDA] filing.

[DewDiligence]

ENTA—A phase-1b/2a monotherapy trial of EDP-239 has been started by NVS, which is the first public sign that NVS really cares about the EDP-239 program. (Source: ENTA’s JMP webcast today.) My ENTA valuation model ascribes zero value for EDP-239, so anything that does happen is all upside.

Please see #msg-89280314 for a summary of the potential milestones for ENTA from the EDP-239 program.

[masterlongevity]

How undervalued do you feel ENTA is ? The market cap is quite low, especially considering all the new IPOs companies coming in above $500M

[DewDiligence]

Additional granularity on ENTA’s partnership economics with ABBV:

Here’s an excerpt from #msg-89280314 (posted in Jun 2013):

On ABT-450, ENTA is eligible to receive $195M in pre-commercialization milestones (of which an undisclosed portion is for NDA filings and the rest is for regulatory approvals) and a double-digit royalty on worldwide sales. (ENTA already received $57M up-front and $55M in clinical-development milestones from ABBV.) ABBV funds all clinical development and commercialization expenses for ABT-450 worldwide.

Based on today’s Morgan Stanley webcast, there are two additional details we can add:

1) The $195M of pre-commercial milestones on ABT-450 payable by ABBV to ENTA consists of $40M for NDA/MAA submissions and $155M for marketing approvals. The $40M and $155M figures are further divided by geography; the overwhelming proportion of each amount is presumably attributable to the US and EU, with a lesser proportion for Japan, and (presumably) much lesser proportions for such countries as Canada, Australia, Switzerland, and emerging markets.

2) ENTA’s royalty on sales of ABBV’s ABT-450-based regimen will be tiered based on product sales in the same manner as IRS tax brackets. The lowest royalty rate is in the low teens, and the highest royalty rate is approximately 20%. The royalty applies to the proportion of value ABT-450 is deemed to contribute to the overall treatment regimen, which I estimate to be 35% for the regimen* ABBV is testing globally for genotype-1 patients. (It matters little whether ribavirin is included in this cocktail since ribavirin is available in all countries as a cheap generic.) For the ABT-450/r + ABT-267 regimen that ABBV plans to test in Japan for genotype-1b (#msg-91870291), I estimate the ENTA’ royalty will apply to 50% of the overall sales.

The information in #msg-89280314 regarding ENTA’s partnership economics on ABT-493 (with ABBV) and EDP-239 (with NVS) remains unchanged.

*ABT-450/r, ABT-267, ABT-333, and possibly ribavirin.