Replies to post #166815 on Biotech Values

[DewDiligence]

Re: ENTA valuation

What makes you think that there is a treater-capacity constraint [for HCV patients]?

Please see my reply to oc631 in #msg-92240143.

…what makes you think that the actual annual patient demand could ever get so high as to exceed this capacity?

The number of HCV patients treated was as high as the maximum throughput of the HCV medical establishment for several years when the initial interferon regimens were introduced, and the impetus for a patient to get treatment with an interferon-free regimen is surely greater than it was back then.

…what makes you think that if this [drug] category grows to that level of annual expenditure, the payers will not limit treatment to F3/F4s like they do in Brazil or Canada already?

Whatever restrictions third-party payers may put on, I think the number of patients treated will be close to the maximum-throughput figure for several years. (I.e. without any reimbursement restrictions, the demand for treatment would be considerably greater than the throughput constraint, IMO.)

Why not wait and only treat those who have higher chance of progression since efficacy is only marginally worse in cirrhotics?

Alas, tools for making sound treatment-deferral decisions with a high level of confidence do not exist, so denying treatment could end up being a death sentence even for someone who seems low-risk for progression to cirrhosis. Moreover, the kinds of treatment-deferral evaluations you advocate exacerbate the throughout bottleneck insofar as many deferred patients will be rechecked (perhaps multiple times) and eventually treated. Thus, the fact that curing patients who have cirrhosis is harder than curing earlier-stage patients is not the only reason to eschew the treatment-deferral approach you espouse.

Overall, I think you are over-optimistic about this market…

That’s possible, of course. However, with ENTA, I think there’s a big enough margin in my valuation model that I can make money even if the overall HCV market ends up being smaller than I’ve projected.

Good questions. Thanks for your input.