Replies to post #174628 on Biotech Values

[DewDiligence]

Re: Sovaldi

…would love to hear others' thoughts and how this will affect ABBV/ENTA.

Higher than expected Sovaldi sales in GT1, specifically, are bearish for ENTA, as we’ve discussed previously. (Higher than expected Sovaldi sales in GT2 and GT3 have no material effect on ENTA.)

The EMA’s compassionate-use allowance of Sovaldi + Ledipasvir is a non-issue, IMO; the EMA previously allowed compassionate use of Sovaldi + BMY’s Daclatasvir, but actual sales are de minimis.

Notably, even as Sovaldi’s US scripts continue on a rocket-ship trajectory, sell-side analysts are inching ever closer to the market-share and sales numbers in my ENTA valuation model—the latest example is BofA (#msg-97629251).

Other Sovaldi-related puts and takes for ENTA investors are enumerated in #msg-96802014.

--
While you believe you are exploiting a market inefficiency vis-à-vis Sovaldi by buying GILD call options, you are also placing a bullish bet on GILD’s TAF, as noted in #msg-97350905.

[jq1234]

I think it is 1). Large uptake in GT1 patients right now just takes away from future GT1 patients when oral combos are available. The peak estimate is HUGE already, since most expect GILD to take 80 or even 90% market share already, thus if ABBV/ENTA do just a little bit better than expected, GILD has to make up by expanding overall market. So it is not risk free from here IMO which is why GILD doesn't move with huge script numbers week after week.

[Rocky3]

GILD - this week's scripts (a partial holiday week):

**The week's total prescriptions for Sovaldi were 5,291, up 10.9% vs. last week's 4,714.
**The week's new prescriptions for Sovaldi were 3,434, , up 8.9% vs. last week's 3,128.

Wells Fargo calculations:

**Plugging these new numbers into our proprietary Sovaldi projector, we believe U.S. Sovaldi sales could reach the following
under these scenarios:
(1) Base case secondary warehousing growth in new patient starts slows Q2Q3 then picks up again Q4 $ 7.32B, up from $6.82B
(2) Rapidly decaying Sovaldi new patient starts throughout remainder of year (bear case) $ 5.44B, up from $4.97B
(3) Sovaldi new patient starts level off for rest of year $10.26B, up from $9.44B
(4) Week over week NRx changes match those seen with Incivek+Victrelis at same point in launch $9.39B, up from $9.21B

Their take-away:

**BOTTOM LINE: Though there have been some concerns raised recently about the sustainability of the Sovaldi launch, the
drug continues to show no signs of slowing down, with this week's prescription data showing considerable continued growth
in total scrips, retained growth in new patient starts, and sales tracking at over $7B worldwide in a base case that allows for
substantial slowdowns in uptake rates during the middle of the year. We remain buyers of GILD and believe that the worries
over eventual prescription flattening this year miss the ''big picture'' evidence of the very large longterm
market opportunity.

First time that I have seen a $10B number for 2014 from one of the analysts. Me: I think that the range is $8-$14B for 2014 and $12-$18B for 2015. Clearly I think that everyone has grossly underestimated how quickly the uptake will be and the size of the overall market. That should be very good news for ABBV?ENTA for 2015 too.

The GILD ads have hit TV. I have not seen one on TV yet. Again, good news for ABBV/ENTA for 2015.

Others thoughts?