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Vertex Pharmaceuticals Incorporated Message Board

  • thirdmeinvestor thirdmeinvestor Aug 2, 2012 11:29 PM Flag

    Value of Kalydeco

    Here is another very conservative estimate for the earnings from Kalydeco in the time frame of 2014 - 2015.
    DR. Beall (CF Foundation president) thought that up to 20% of CF persons might benefit by taking Kalydeco, but both he and Dr. Campbell gave 15% or higher as the likely figure (also in the Nature Biotechnology News). Very conservatively, I choose 6% (5 years old or younger are excluded) of CF persons choose to receive Kalydeco by the end of 2014.

    So, the number of persons who take the medication = 6% x 70K patients in US+EU
    = 4,200

    About 10% of patients would get the drug free of charge; 90% of 4200 patients = 3780 of paying pts.

    The price tag for a year per patient is 294K, but Vertex may give 20% discounts to the private and Government insurance companies throughout the US and EU.
    So, the revenue would be:

    294K x (100-20%) x 3780 = 889M

    Subtract a 10% royalty to the CF Foundation, and 60M for the sales cost for the year 2014-5.

    889M x (1 – 10%) – 60M = 740M

    The number of shares in 2014-2015 = 225M
    740M / 225M = $3.29/shr

    You have to give a 'PE' of 15. So, a conservative target is $ 49.34 without the participation of 809. Incivek has to shoulder the financing of other general expenditure for the next 3 years.

    If/when the 400 mg VX-809 bid dosing arm in Phase III is highly successful, interim results may be reported within 1.5 years from now. The 'PE' of Kalydeco would make a quantum jump. If VX-661 is successful, expect a mammoth jump in the share price early next year.

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    • I would hope to see the vx-787 data sooner but given the methodolgy of delaying the release of the Alios data to coincide with the Q2 earnings disappointment and the delay of the vx-661 data to q1 2013, it looks like they are lining up data releases for earnings announcements. I would think they would release it with the q3 earnings disaster and the vx-661 with q4 earnings. Both commendable and despicable. Encouraging and disappointing.

    • Thanks everyone for your educational posts.

      What do you know about the regulatory hurdles of developing a treatment for influenza given that technically "millions" of patients could be exposed to the drug after approval?

      How much safety (clinical trial size) the FDA will require, hundreds or thousands of subjects for the pivotal study?

      The studies are short (e.g. 7-10 days of treatment) so maybe the path to NDA is fast?

    • Both your posts and Rojo's are educational. The clinical data will be reported soon.

      For others who may not be familiar with VX-787, I paste below (Seeking-Alpha's transcript of) a segment of statement made by Dr. Jeff Leiden at this year's JPMorgan Healthcare Conf..

      "Let’s move on to the next card and the next disease, influenza, it’s this card here. Here is an intriguing fact about the flu, each year in the U.S. more people die from flu than die from HIV AIDS. I think that probably tells you a lot about the need for new drugs in this area. In the typical year, 30 million people in the U.S. get the flu and it’s important to appreciate that for many patients the flu isn’t just the sniffles, it’s a serious disease that results in 200,000 hospitalizations and an average 30,000 deaths in the U.S. each year. And every 20 years or so, there is a pandemic, as you probably know, the 1918 pandemic killed more than 50 million people around the world, which represented about 3% of the entire world population.

      What if there was a new antiviral agent that was one clinically effective against all strains of influenza A, including both pandemic and avian flu strains. Second could be effectively dosed as a therapeutic agent many days after the initial development of symptoms. And third could be given prophylactically to vulnerable populations during an outbreak to actually prevent infection of those patients. We are working on an interesting molecule just like that called VX-787 at Vertex.

      I think the data shown on this slide will help explain why we are excited about the potential of this compound to expand the treatment window for flu. This in an in vivo model of flu in mice, I mean, this model Tamiflu or oseltamivir, which is the current standard-of-care had to be dosed within 24 to 48 hours in order to rescue the mice from lethal infection.

      In contrast, as you can see on this slide, VX-787, the Vertex molecule was effective out to four and five days post infection. In fact, no mice died if they were dosed with VX-787 within four days. To our knowledge, this is the first and only molecule so far no one to do this. So, this was very encouraging data to allow us to take the molecule into the clinic and given that data we have moved VX-787 into Phase 1 studies in healthy volunteers already and we’ll be moving into a proof-of-concept clinical study in patients infected with flu in the first half of 2012."

    • Thanks much for the detailed explanation.

      Out of curiosity, why do you think that Wall Street values so poorly Vertex in comparison with Alexion?

      There is a mismatch between how both companies are valued, probably Alexion is overvalued while Vertex is undervalued, but why?

      • 1 Reply to agnostinvesting
      • The answer is simple. Perception rules the share price. Vertex is perceived as a HCV PI player and the sales for the PI are declining. The fact is the value of Incivek is at most $20 per share unless miraculously the proposed combo pill of ALS2200 and Incivek eliminates tolerability problem (CMO Bob thought that it would be less than the current triple therapy).
        For the short term the CF program is more important for Vertex. If Alios nucs are safe and tolerable in combination with RBV or with Incivek, the HCV program will also be important. But the cost of developing oral pill against HCV may have to come from another share offering unless Vertex find another partner.

        Analysts are supposed correct such misconception. Most of them know the fact and give a buy or overweight rating for VRTX. See the WSJ's summary below:

    • Thanks for the analysis. What you forget is that Vertex is a company that burns lots of cash for R&D and operations. So the conversion you make of profits to pps based on the PE do not correspond to reality of the price per share .

      Just recall that this last quarter Vertex lost money even with revenues above $400 M.

      Vertex needs to sell more than 1.3 Billion / year just to break even on expenses!

      • 1 Reply to agnostinvesting
      • In a couple of years with half or more of the CF population on receiving VX 770 with 809 or 661 that alone will generate six to eight billion a year for the lifetime of the patient (or until the patents on the drugs expires in the late 2o2o's). Then factor in the possibilities of VX 509, 787, Alios nucs, with or without the current VRTX hapatitis C assests. The next couple of years may not be hugely profitable on paper, but every month positive clinical trial results will show Vertex getting closer to approval of this pipeline of drugs to treat all these diseases. It will boost VRTX stock on the prospects for huge growth in the future just like it did for Pharmasett and currently for Gilead.

    • Third... excellent conservative analysis of CF potential. Kalydeco monotherapy will likely treat a larger number of CF patients so I project peak sales globally of over six thousand patients a year, given the potential for helping all gating mutations starting as young as two years of age. Multiply that number by at least five if VX 809 and or VX 661 gets approval in the next two or three years. Of course the critics of Vertex give no value to hep C, influenza or autoimmune disease potential as well....

      Remember proof of concept data for inlfuenza is due in a couple of months, and announcement of the initiation of VX 509 studies in other autoimmune diseases is expected before year end. Jeff Leiden brought injectable Humira to Abbott, and it brings in 6 billion a year to Abbott treating the autoimmune diseases that oral VX 509 will be tested to treat. These diseases (RA, psoriasis, psoriatic arthritis, Crohns disease) are chronic and tough to treat patients usually rotate through the various new drugs that become available serching for the most effective, least toxic, and most convenient choice. VX 509 will represent a potential next generation treatment option for these patients with a current market of $15 billion a year.

      It would not surprise me to hear Vertex partner with JNJ or Abbott or BMY to accelerate combination studies with the Alios nucs before year end as well. There is no way Vertex management sell out cheaply to a larger pharma with a low ball buyout offer given the depth and potential of it's pipeline which is just a couple of years away from huge growth in furture revenue and earnings.

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