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Vertex Pharmaceuticals Incorporated Message Board

  • tek_jansen500 tek_jansen500 Apr 14, 2012 7:49 PM Flag

    Kalydeco guestimates

    I just going to take some guesses and do some very rough calculations to try to get an idea of what Kalydeco revenues might be this year and next. (I expect Verity will have some knowledgeable adjustments for my guesses.)

    If I remember right, Vertex estimated 1000 US patients treatable according to the FDA approved label. Given the extraordinary medical treatment (and physician contact) required to survive with CF, I estimate all patients will be treating, with an average start date 2 months after approval. This happens to coincide with the start of Q1. Assuming Vertex gets $270,000 per patient-year after discounts, these patients generate $202 million this year. (1000 * 270,000 * 3/4)

    Then I think Vertex estimated another ~1000 patients with other gating defects (plus R117H?) should be treatable by Kalydeco. I assume these are strong contenders for off-label treatment, with 200 (conservative guess) using Kalydeco 200 treating this year. Then I'm guessing there are another 100 G551D patients under age 6, of which 1/2 treat off-label. If these 250 patients start treatment on average half-way through the year, that's another (250 * 270,000 * 0.5) $34 million this year.

    Finally, let's assume European approval in August for G551D and the other mutations. I'll guess that the European treatable population is the same size as the US, so 2000 patients, but that Vertex only gets $190,000 per patient-year. I'll assume slower uptake as well, with 1500 patients getting on treatment for an average of just November & December. That gives another (1500 * 190,000 * 2/12) $47 million in revenues this year.

    That gives Vertex a total of $283 million of Kalydeco revenues this year. (As an aside, I'll also guess $1 billion of European Incivek sales, with 15% royalty to Vertex for $150 million. That's $433 million of revenue this year that no one is counting yet.)

    For 2013, I'll assume the same number of US patients for the full year, plus 2000 European patients all year. That's (1250 * 270,000) $337 million in the US plus (2000 * 190,000) $380 million in Europe for $717 million total Kalydeco revenues. Not too shabby.

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    • I disagree on the HCV results. Good results, which are already in the bag (rather than great) mean they have to compete on price and they end up with $300 million of HCV revenue in a few years instead of $1.5 B. Kalydeco revenues are ~$1.2 billion by then. COGS and clinical trial expenses drop a lot, getting expenses to ~$750 million, leaving $750 million of annual profit for a currently $7.5 billion company. Looks like a good deal to me, considering it's a worst case scenario. And if things don't go worst-case, the potential for gains is very large indeed.

      If you're frustrated with the stock price performance so far, I sympathize. But remember, past performance is no guarantee of future results.

    • >>>I'll admit that Vertex's burn rate is scary, but going forward, one of two things will happen. Either one or more of their phase 2 trials (RA, CF, HCV, epilipsy, flu) gets proof of concept, putting another blockbuster drug into phase III. Or they all fail (unlikely but possible) and Vertex can cut their burn rate a lot, increasing profits.

      If the trials for HCV are not excellent (good is not enough) and at least one corrector shows clear promise of strong clinical efficacy, the stock will drop substantially, to the mid-low 20s. To cut the burn rate from $900 millions/year to a reasonable level of <$500 millions/year the company will have to make dramatic changes, including extensive layoffs. How do you think that will save to increase the stock price?

    • Tek you are so right....I follow all that chatter and everyone wants this drug! and even the unmotivated are going to bother because they will think I'll just give my kid this pill and not do any sad there are a few like that but as you say most are so highly will be more than 100 percent. Also FYI all my numbers rate ...private v public came from vertex presentations.

    • I'm cutting/pasting my earlier post b/c I had written right after conference with #. At the end I'll update my estimates with numbers:

      2012: About $400,000,000 from U.S. Doesn’t include Europe which should approve shortly and could double revenues.

      a. Market Size: Vertex said that 1,200 have 551 mutation, 200 are under 6, 100 are in extended study, and that 90% of CF population’s genotype in known in CF Registry. From this, on label market size would be 900, plus those who are not known in CF Registry to be 551 and who are 6. That would be about another 111. Assuming same % not in CF Registry have 551 as those in CF Registry that would be 133. (90% of 30000 is 27,000 and 1,200 is .04444% of 27,000, and .04444% of 3,000, i.e., those not genotyped/genotype not known by CF Registry. And the % under 6 is about 16% based on the 200 of 1,200.) The 900 plus 111 is 1011, and I estimate 90% penetration–higher for those with known mutation, lower for those without, more under 6 will know mutation than those over because many newborn screening includes genotyping, but averaging to 90%.
      b. Revenue Calculation: $246,136,800. 910 population, 60% private insured cover entire $294,000, 40% government insurance and assuming 20% discount, total annual revenue.
      c. Off Label Revenue: $144,977,280. I predict 4 and 5 year olds will use off label–CFers under 6 use nearly all the meds off-label and that age group should be able to swallow pills since they are use to taking enzymes likely as pills by that age. Assuming 200 under 6 is evenly distributed, that adds another 36 (40 *.90 penetration) and another $9,737,280. I would also predict another 500 will use off label and think this is pretty conservative–500 is about half of those having one of the similar mutations for which Vertex is currently testing to get on-label use. Many of those will try to get access now and will have a strong argument for coverage. That would add another $135,240,000. Many more might succeed in obtaining coverage for off-label use.

      2013: $1.2 billion: You can do the same calculation if you want, but my estimate is that the market will be triple by then when you add Europe (which will cover 551 and other gating mutations), and the other gating mutations which will then be on-label.

      Update re #: Off-label use is going to be higher in 2012. 1) I predict at least 100 total under 6 using (going down to ages 2 and 3 and including some 4 and 5 year olds with other mutations).
      2) And I predict at least another 500 using off label for other mutations--a higher % for gating mutations using off label and some without gating mutations (for a total of 1000).
      3) This means 2013 won't see as big of a jump in use, maybe another 500-1000 in off-label use for non-gating mutations/unknown mutations.
      4) Europe/Australia will likely not have the off-label use we have here.

      Word on the street is this is truly a miracle drug and everyone is trying to get their hands on it. Shoot some prayers up for 661/809 as we could use another miracle!!

    • These are good estimates. My estimate is consistent with yours. Earnings from Kalydeco alone will be at least a dollar this year and they would double each year to earn more than $4 per share in a few years. The quality of earnings is good for this portion, and a P/E of 25 is conservative.

      • 1 Reply to thirdmeinvestor
      • Third, using your numbers for Kalydeco sales estimates (which are more conservative than the other two posters) doubling each year for the next few years, you have $1/share or $210 million in 2012, $2/share or $420 million in 2013, and $4/share or $840 million in 2014. I agree that the quality of these earnings is much higher than those from Incivek because there will be no real competition faced by Kalydeco for the foreseeable future. This is probably why the current forward PE of about 10, which is based on Incivek sales, is so low. The expectation is that competition from other hepatitis C drugs will take away a large portion of revenues from Incivek starting in 2014. Therefore, an $840 million revenue stream from a new drug facing no competition should result in a much higher PE ratio, possibly 25 or more. Earnings of $4/share with a 25 PE ratio would yield a $100 pps. Of course, this values Vertex on the basis of Kalydeco sales alone, with no value assigned to any remaining revenue from Incivek and no value assigned to the rest of Vertex's pipeline. The bottom line is: If Kaydeco is anywhere near as successful as you expect, Vertex is one of the most undervalued publicly traded biopharma companies ever.

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