CORRECTION: GILD v. ABBV: An In-Depth Review of Global Sales Prospects for Current-Generation Hepatitis C Treatments

Richard

We believe consensus estimates for global HCV sales are reasonable; however we believe the share of consensus allocated to GILD’s regimens (77%) is a best-case scenario; and that the share of global consensus attributed to ABBV’s pending HCV franchise is far too low

Consensus calls for ABBV’s current-generation HCV therapies, due for US approval on 12/22/14, to capture just 6 pct of the global market, yielding $7.6B (roughly 10 pct of ABBV consensus sales). In contrast, we expect the ABBV regimen to capture at least 20 pct, yielding at least $17B. We see the ABBV v. GILD comparison as very similar to the PEG-Intron v. Pegasys competition, in which PEG-Intron captured nearly a third of global demand

A key factor in our above consensus sales forecast for ABBV is that its regimen is a highly legitimate alternative to GILD’s. Even though GILD’s new regimens (100% response, 8-12 week treatment duration) are better than ABBV’s (93-96% response, 12 week duration), ABBV’s regimen is an outstanding alternative for first line treatment, especially if it is available for less than GILD’s regimens. We’re aware ABBV has signaled it does not intend to compete on (list) price; however we believe they have no practical alternative other than to compete on net (of rebates) pricing

 

CORRECTION: This note corrects an error in our calculation of global HCV sales potential in our note published August 4th, 2013. We previously stated that global HCV demand for current generation agents would be less than consensus expects; having corrected the underlying error our estimate of global HCV demand is now on par with consensus. Importantly, we had also argued that consensus forecasts for GILD’s HCV regimens were 20% to 30% too high; having corrected the underlying error our forecasts for GILD’s HCV regimens are now roughly on par with consensus (our # is $58B v. $64B consensus, though we believe consensus’ assumption for GILD’s share of global cumulative sales (77%) is at the outer edge of reasonable estimates. Our conclusion that ABBV is undervalued (both in the absolute and relative to GILD) remains unchanged; in fact because our expectations for global sales have risen, the dollar value of ABBV’s expected >=20% share also has risen, strengthening our conviction that ABBV’s HCV treatments are undervalued (we expect >= $17B v. consensus of just $7.6B)

The underlying error in our original note was a miscalculation of WW sales potential. We applied the expected ROW:US sales ratio to expected US sales, and incorrectly stated the product as expected WW sales, as opposed to expected ROW sales. The error is corrected in updated versions of Exhibits 10, 11, 12 and 15 on pages 11, 12 & 14. Changes to these exhibits are highlighted in red

 

For our full research notes, please visit our published research site

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