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Vertex Pharmaceuticals Incorporated Message Board

  • thirdmeinvestor thirdmeinvestor Jun 4, 2011 11:13 AM Flag

    An estimate for Incivek's value

    The following estimate of Incivek’s earning power is based on many assumptions and should not be considered as an inducement for investment. Still it is the best I can come up with for the launch year of 2011-12.
    Back in 2009 BOC was thought to be at least 2 years behind TVR because of the EPO issue, and my estimate neglected its effect on TVR’s first year sales. Merck has effectively ambushed Vertex by executing unannounced phase III trials for BOC and by finding the very generous FDA.

    The estimate below assumes the market share of Victrelis is 40%, and that of SOC is 10%. Major uncertainties come from two sources: 1) the number of patients who would choose the treatment with protease inhibitors (PI), and 2) actual payment for the drug. With this understanding I venture to estimate the potential earnings power of Incivek for the launch year.

    The total number of patients who will choose to be treated in the launch year of PI would be about 100 thousands. Assume that only 50% of the group takes Incivek. This gives 50,000 patients to choose Incivek in the launch year; this may be conservative, but it is the company’s target. This figure can be arrived as follows: there are 3~400 specialist doctors in contact, each treats 3 patients a week. This gives 3 pts x 52 wks x 350 = 54600.

    The drug for 12 wks costs $49,200 for a patient, but the wholesale price would be less, I neglect the differential below. If you multiply the figures, you come up with 50,000 x 49,200 = $2.95 billion. The actual revenue would be much less than this amount because (1) some patients will receive the drug free of charge (they have no insurance AND the household income is less than 100K, both CCO and CFO said this category is only a single digit %), (2) copay would be reimbursed by Vertex (c.c. stated ~60% are insured by private insurance cos, and copay is typically $50-$250/mo), (3) unknown amount would be discounted to the holders of government sponsored insurance and they make up ~35%and (4) 5 % of patients will pay cash.
    All of numbers in (1)~(4) came from the conf. call held after the FDA approval.

    Below, we estimate the revenue reductions due to each category above.
    (1) Assume that the number of patients who get free drug is 10%;
    Then, the paying patient’s number is 45,000.
    (2) Assume that all insurance cos get 20% discount. Copay reimbursement is about $200 /mo for 3 months. 60% of paying patients belong to this category;
    60% of 45,000 pts = 27,000
    The revenue loss from the discount is: 20% x 49.2K x 27K = 265.7M
    Total copay payment by Vertex = 27,000 x $600 = $16.2 M
    (3) Let us assume Vertex’ contribution here is about 20%.
    35% of 45,000 = 15,750
    20% of 15,750 x 49,200 = 155 M
    This amount has to be subtracted from the revenue.
    (4) Cash purchase leaves the amount intact.

    The net from the US sales will be:

    49,200 x 45,000 – 265.7M - 16.2M – 155M = 1777M

    The EU sales estimate (CSO said the EU approval will likely occur in October) is based on two assumptions: 1) the number of paying patients is 50,000, 2) J&J offers 20% discount to the price.
    49,200 x 50,000 x 80% = 1,968 B
    Since there will be only 6 months of sale until next June; 984 M ...a 25% royalty from that is 246 M.

    The total estimated revenue from both the US and EU operations is the addition of the above two:

    1777 M + 246 M= 2.02 B.

    The annual expenditure would be more than the current rate of $700 million. Let us say that it is $1 billion for the coming 1 year because pipeline developments would accelerate. By June 2012 the total number of outstanding shares would be around 210 million. Thus, the potential earnings per share would be $4.86 per shr.. I suspect the actual figure will be less than this because of possible pricing competition and patients who choose to delay treatment.

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    • The application is probably as big as an encyclopedia. Don't think it's shared with the public. Though Vertex may make public statements on this matter at a later date.

    • Hmmm, good point. Not sure how that works. My insurance covers all my son's $$$$ off-label meds. Some might balk, but other might realize it is cheeper than the alternatives and accept with dr's letter.

    • One BIG problem for off-label use will be the price as one may assume that Insurance companies would only cover prescriptions for the approved genotype, 551D. So, off-label use may need to be covered by the patients and if this is the case very few may afford that ...

    • Just to clarify--the doctors KNOW several other mutations have a similar gating defect. I think under those circumstances, it is much more likely that 770 isn't just going to be a "try" and then a fall-away by those CFers. And they will have some studies confirming action so even if FDA only approaches 770 for 551 now, I expect expanded on-label-use with 3 years.

    • Thanks for sharing the information. I think that the FDA will only approve for 551D genotype, but certainly there are good chances that at least a percentage of other genotypes will try the 770 to see if it works. Probably that will increase the percentage of CF patients to try 770 at one point in the range you propose of 15%, and depending how well it works, it may stay like that or revert to the 5% defined from the 551D genotype.

      I am not sure why the analysts do not count that much value for 770 at this point ... if it brings $1.5B/year that is as much as Telepravir ... with much longer staying power.

    • Tek,
      I can't seem to find link on fda page for nda applications?? Are they posted at fda page? Did Vertex post on its webpage? I'm really interested in reading the nda to see how they handle the other gating mutations.

    • Filings are planned for the US, Canada and Europe in the 2nd half of this year. Assuming "2nd half" actually means Q4, then approval would come in Q2 2012.

    • 5% have 551. But UP TO 20% have a similar gating defect. Probably closer to 12%, but 15% is within reasonable. I actually predict NDA seeking approval for more than 551, but even if they don't, doctors will do off label. If my son had a gating defect (he's double-delta), I'd insist he start on VX-770 now, instead of waiting for future studies. And the CF doctors are probably the biggest off-label prescribers because of the nature of the disease. (Son was on off-label meds since 3 weeks old!) And here you have a very good safety profile for VX-770!

    • Given that you're assuming discounting, then your guess of 50% of sales is too low..only reason for a 50% of sales is if the price is too high. Almost all doctors and patients will look first to VRTX--they will go the MRK only if forced by controlled formularies that are price based--and as the cc said, formularies are looking at price to cure, not price per dose.
      Also, your 100K estimate is likely low--many patients have held off any RX waiting for this drug.
      I have no estimate, except that I am betting yours is too low--if yours is correct, there is no reason to hold this stock at this time.

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