Replies to post #171343 on Biotech Values

[Katsche]

ENTA-valuation model

Dew, GILD`s figures for hcv-treatment:
USA:58000
EU5:49000
JP:37000
I would split between US and EU5: 55%-45%
Have sapphire no implication for your market share of 38% ?
Katsche

[GrthzGd]

Dew:
Given that two competing drugs-ABBV/ENTA and GILD's-are hitting the HCV treatment market at the same time, there must be a finite chance that a third one could also arise, and severely reduce both pricing and sales. Have you given any thought to this in your model?
GG

[ronpopeil]

GILD results out. Thoughts? Tia

http://finance.yahoo.com/news/gilead-announces-svr12-rates-three-133000942.html

[gdollasign]

The market seems to think that 38% market share is too large. What do you think Dew? Are they being shortsighted?

[DewDiligence]

Re: CS report on HCV / ENTA valuation

In a report on the HCV marketplace dated yesterday, Credit Suisse forecasts peak annual sales of $2.0B for ABBV/ENTA’s 3-DAA regimen, which is about half the $4.1B figure in my valuation model in #msg-94993406.

As an exercise, I plugged CS’s $2.0B peak-sales number into my model, keeping other assumptions in the model unchanged; the effect of this is to lower the value of ENTA’s (fully taxed) ABT-450 royalty stream from $52/sh to $25/sh, which lowers the model’s bottom line figure from $81/sh to $54/sh.

In other words, using CS’s somewhat bearish sales forecast, my model still delivers a nominal price target for early 2015 that is about 2x the current share price.

[DewDiligence]

ABBV/ENTA’s Phase-3 HCV Program in Japan

Unlike the nine global phase-3 trials enumerated in #msg-94927196, the two
phase-3 trials for the Japanese market are testing the 2-DAA regimen of the
protease inhibitor, ABT-450 (licensed by ABBV from ENTA) and the NS5A
inhibitor, ABT-267. For GT1b patients, ribavirin is not included, so this
is a qD regimen. For GT2 patients, ribavirin is included, so it’s a BID regimen.

Please note that ENTA derives a larger royalty rate on sales of the 2-DAA
regimen than on sales of the global 3-DAA regimen because ABT-450 represents
a larger share of the contractual value when there are only two drugs in the cocktail.

There are now two Japanese phase-3 trials on clinicaltrials.gov (h/t @lomu_j):
one for GT1b and one for GT2, the two most common genotypes in Japan.


GIFT-1—treatment-naïve and treatment-experienced GT1b with and w/o cirrhosis;
ABT-450+ABT267 for 12w vs. identical regimen delayed by 12 weeks of placebo use (i.e.
the same design as SAPHIRE-1 and SAPHIRE-2); patients with cirrhosis will be placed
in a separate open-label arm; 312 patients; expected completion Nov 2014:
http://clinicaltrials.gov/ct2/show/NCT02023099

GIFT-2—treatment-naïve and treatment-experienced GT2 with and w/o cirrhosis;
open-label ABT-450+ABT-267+ribavirin for 12w vs. identical regimen for 16w;
150 patients; expected completion Dec 2014:
http://clinicaltrials.gov/ct2/show/NCT02023112


p.s. In my ENTA valuation model (#msg-94993406), I conservatively ascribed
only $100M of value to ABBV/ENTA’s HCV program in Japan.

[DewDiligence]

ENTA’s JPM slides:

http://jpmorgan.metameetings.com/confbook/healthcare14/stash/slides/13735/confbook_slideshow.php?webfeed=2

[DewDiligence]

HCV GT1 stats from ABBV’s JPM webcast:

• 4M infected patients in ‘G7’ developed countries*; 2M of them are currently diagnosed.

• 1M of the 2M diagnosed patients in G7 countries are treatment-naïve and 1M are treatment-experienced.

These figures imply a long runway for treatment of GT1 patients rather than an Incivek-like boom and bust. I.e. the number of patients treated per year will be constrained by supply (i.e. throughput) rather than demand, which is consistent with the assumptions in my ENTA valuation model in #msg-94993406.

*US, Germany, France, UK, Italy, Spain, Canada.

[GrthzGd]

During the next several years, the market for HCV drugs in the US and EU will be limited not so much by the number of patients with chronic HCV infection, but rather by the number of treating physicians and how many prescriptions they can write per year—i.e. the maximum throughput of the HCV medical establishment, which is approximately 350K patients per year.

Dew: That strikes me as the most important assumption in your model. What does the evidence behind it consist of, if you don't mind my asking?

[DewDiligence]

FMR owned 11.6% of ENTA (2.08M shares) as of 12/31/13:

http://www.sec.gov/Archives/edgar/data/315066/000031506614001813/filing.txt

[DewDiligence]

ENTA all-time intraday high (41.10); 2nd-highest all-time close (39.54). The share price is about halfway to the $81 figure in my valuation model (#msg-94993406).

[DewDiligence]

Notes from ENTA’s WF webcast:

• ABT-493 + (ABBV’s) ABT-530: Monotherapy cohorts in HCV patients are done; phase-2 combination study in HCV patients will start this summer.

• EDP-239: Monotherapy cohorts in HCV patients are almost done; phase-2 DDI trial with NVS’ alisporvir* in healthy volunteers starts 2Q14 (i.e. very soon); phase-2b trial of EDP-239 + alisporvir in HCV patients will start at conclusion of DDI trial, at which point ENTA will earn a $15M milestone payment from NVS.

*Cyclophilin inhibitor f/k/a DEB 025.

[DewDiligence]

ENTA—New all-time intraday ($44.48) and closing ($44.19) highs.

[masterlongevity]

have you made any changes to the assumptions or the ultimate number in your valuation model? Thinking of adding more shares today.

[DewDiligence]

ABBV/ENTA/GILD—@zbiotech tweeted some details of a Deutsche Bank survey of prescribing MDs that is, by and large, bullish for ABBV/ENTA.