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Vertex Pharmaceuticals Incorporated Message Board

  • thirdmeinvestor thirdmeinvestor Sep 30, 2011 8:18 PM Flag

    My thoughts after going through AASLD abstracts

    This year's AASLD abstracts report wealth of information on rival Hep C drugs. However, it is absolutely amazing to me that most abstracts skip reporting the data for the control group (Peg/Riba treated). I know, having worked in biological labs for many years, that how important it is to report the data for the control group. To illustrate, the numerial result for the PSI-7977 PROTON study (for GT1) reported in an Abstract contains the following data.

    __________P/R+7977
    ________200mg__400mg__P/R
    ___________________________
    eRVR____47/48__43/47__5/26
    EOT_____42/45__40/43__ -
    Relapse__1/30___0/30___ -
    SVR4____26/30__27/30__ -

    That's right. It lists only eRVR for the control P/R(peg/Riba) group. Even at EASL conference(six months ago) they reported the end-of-treatment UND rate as 62%. Why don't they disclose this important piece of data?

    The abstract for Boehringer Ingelheim's 335 was an exception. It reports that an av. SVR rate of 83% for their PI treated group and 56% for the control group. So, BI201335 is not more efficacious than Incivek. They do not report safety concerns.

    I would not be surprised if the final result for 7977 trial gives 62% for the control group's SVR rate. Remember the SVR rates for Control in all Incivek trials were 45%(+/-few%).

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    • "That's right. It lists only eRVR for the control P/R(peg/Riba) group."
      -----------------------------------------
      You are spot on. If you recall in the 6 months ago information release by VRUS, it was brought to the attention of those who listend the fact that VRUS had selected EASY TO TREAT PATIENTS based on the much better results for its control group. There has not been a SINGLE STUDY by any company other than VRUS where an hcv trial's control group has shown a similar result or even come close to it.

      For a long time SGP was massaging its data to make it look better than it was as now the final evidence for Victrelis is showing. Now VRUS has taken up the same tact IMO.

      • 1 Reply to gladpick
      • VRUS is also testing their treatment on easier to treat patients with genotypes 2 and 3. VRTX studies have treated genotype 1 patients which are harder to cure.

        Genotype 1 is the most common,accounting for 60% of global infections, and predominates in North America and Northern Europe.

        That said, wouldn't VRUS have to eventually perform testing in genotype 1 patients to address the US and northern European markets?

    • johnf50@rocketmail.com johnf50 Sep 30, 2011 10:39 PM Flag

      VRUS's revenue stream did not increase 43% last quarter. Its revenue is not going to increase 43% in the next year, or two, or even three. That there proves my point on the disconnect between an actual business and the shares of ownership that represent it.
      VRUS company executives have boldly stated in conferences that they are confident that they can go to market for money. They have stated that they are not interested in a partnership agreement to raise capital. Which, while I agree that is good, it also points out that there is going to be another round of financing.
      I am from the Graham Dodd school of thought. And for the readers that don't know, that means I look at a situation from the perspective of what would I pay if I was buying the company as the sole owner. All risk... all reward.
      The enterprise value today according to Yahoo finance is 5.64 billion. They are losing roughly 60 million a year and have 127 million in cash. So even at current rate, they will run out of cash in two years. They have stated that they plan on having an all oral approval by end of 2015. Assuming a 10 month FDA review and a two month application process... that puts phase 3 results released end of 2014. To take these through phase 3 I assume their losess will near 500 million a year. That is a rough average I have seen on single drug biotechs. If you have better info I will gladly adjust my thesis.
      Cash Flow Projection as a sole owner... assuming I also fork over the additional capital needs:
      And because we are assuming VRUS is 100% successful let's assume everyone is successful.
      a) Bristol Myers all oral regimen for GT1 phase 2a through 2012; phase 2b through 2014, phase 3 through 2016; market 2018.
      b) Roche all oral regimen phase 2 through 2012; phase 3 through 2015; market 2017.
      And for simplicity, lets ignore GT1-GT6, and all of the other developments and issues. Let's assume a price war divides the market share evenly, initial year blockbuster sales of 5 billion and 30% year over year growth.
      2011 -$5,640 M
      2012 -$0 (-$60 M from cash)
      2013 -$440 M (-$60 M from cash)
      2014 -$500 M
      2015 -$160 M (Added 100 M for launch)
      2016 +$5,000 M
      2017 +$3,250 M (Roche takes 50% market share)
      2018 +$2,788 M (Bristol Myers, and Roche take 33% market share respectively)
      2019 +$1,000 M (Everyone else is on market now)
      2020 +$1,000 M
      This series of cash flows generates an IRR of 11.88%.
      What are my alternatives... Let's look at Vertex.
      Using the following assumptions:
      a) 5,000 M a year w/ 80/20 split toward MRK,
      b) 500 M opex
      c) Add of 300 M to net income - Yes I think they will be cash positive by year end.
      d) And ignoring any potential Cystic Fibrosis, Rheumatoid Arthritis, or any other inflammatory disease revenue.
      e) And because everyone's success is 100% priced in... let's assume Alios all oral is good.
      2011 -$8,860 M
      2012 +$3,500 M
      2013 +$3,500 M
      2014 +$3,500 M
      2015 +$3,500 M
      2016 -$500 M
      2017 -$500 M
      2018 -$500 M
      2019 +$1,000 M (Everyone else is on market now)
      2020 +$1,000 M
      That is an IRR of 20.68%. Double the return of Pharmasett... or you could just double the price of Vertex to value these two companies the same.
      You add in future Rheumatoid Arthritis revenue (a 10 billion dollar plus a year market) and this increases substantially. But let's stop assuming everything is successful and fully priced.
      So as a sole owner... I would not take 5.64 billion dollars and invest it for only a 11.88% return in VRUS when I could invest 8.86 billion for a 20.68% return in VRTX.
      That is why VRUS's current valuation is absurd. It takes zero account of its imminent competition, lack of cash, lack of cash flow, and future competition.

 
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