Replies to post #174630 on Biotech Values

[kris_kade]

Dew, if higher GT1 sales for Gilead is bearish for Enanta, I am not clear how analysts can revise sales and share upward for ABBV ? Could initial trejectory not representative of steady state for years to come for both Gilead and ABBV ? T.I.A

[Rocky3]

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.)

Of course, we won't know how much of the sales are in GTI in Q1 for awhile. Everyone had assumed that there were not enough GT2 and GT3 patients to produce the kind of sales that Sovaldi is doing, but we just won't know.

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.

Again, we just don't know whether that will change. The point of the comment was not directed at sales but the likelihood of approval without problems.

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).

The fact that the scripts continue on "rocket-ship trajectory" has been my point. It surely supports the size of the market, and establishes GILD as the primary player for '14. The eventual market-share guesses are exactly that - guesses. Right now, the fact is that Sovaldi is selling at a $9B rate and has been increasing every week - though next week will be down due to a holiday. My guess - the market will be larger than anyone has guessed - maybe $15B and the ramp will be much faster than anyone guessed - maybe reaching it in '15 or '16 instead of '20 -'22. That is good news for all the players.

I would suggest that there is no such low-hanging fruit to be harvested. The most consequential unknown in GILD’s future is not Sovaldi (or Sovaldi + Ledispavir), but rather is TAF—the lifecycle management replacement for Viread that will determine the status of GILD’s colossal HIV franchise 5-10 years out. Investors who are long GILD at the current valuation are thus making a bullish bet on the prospects of TAF, whether they realize it or not.

Huh? GILD's "colossal" HIV franchise is doing just fine right now and it looks like will be smaller than its HCV franchise in '15, not '18-'19 as most analysts are guessing. Is it important for it to keep the HIV franchise strong? Of course! But the sales of Stribind are quite strong and will more than double this year to over $1B. But a new drug that will sell $5-10B makes any other issue seem minute, unless the HIV drugs start disappearing and there seems no reason to believe that the GILD estimate of flat sales growth of the other drugs is wrong.