RE: RE: Target rise from VersantSecond Try¸...
TARGET INCREASE REFLECTS POSITIVE IMPACT FROM
SANOFI-AVENTIS ALLIANCE
We have revised our model to incorporate Latin American/African/Middle
Eastern Egrifta sales into valuation as follows:
• We assume Latin American HIV lipodystrophy market is about half of
North American market, which our model assumes can reach peak
sales of US$687 million by F2017. Medical market size is clearly
influenced by multiple factors and not just disease incidence, but HIV
prevalence is high in Brazil in particular (730,000 infected individuals
according to 2007 data published by USAID) and Mexico (200,000
infected individuals, USAID data), comparable to U.S. prevalence on
per capita basis (1.1 million infected individuals in 2007 according to
U.S. CDC). Management predicts that Latin America constitutes about
80%-to-90% of total Egrifta revenue opportunity ascribed to deal, so
for modeling purposes we will assume revenue solely from Latin
American sales.
• Key rationale for partnering with Sanofi-Aventis in secondary regional
markets is undoubtedly preexisting relationship that Theratechnologies’
senior management already had with the firm, but while Sanofi-Aventis
has modest experience in marketing growth hormone (GH) or
metabolic therapies (excluding its diabetes franchise targeting a distinct
chronic medical market, and excluding orphan markets targeted by
Genzyme), the company does have a solid focus on emerging markets.
In Q3/10 alone, so-called emerging markets contributed 29.6%, or €2.3
billion, of total product sales and €877 million of this was to BRIC
(Brazil-Russia-India-China) nations of which Brazil is clearly relevant to
Egrifta marketing alliance announced today.
• But on the flip side, Sanofi-Aventis does not yet have marketing
bandwidth in HIV drug marketing that other major pharma firms like
Bristol Myers Squibb (Reyataz), Merck (Isentress-Crixivan), Gilead
(Atripta-Truvada), Boehringer Ingelheim (Aptivus-Viramune) or J&J
(Prezista) do, and in Sanofi-Aventis’ Q3/10 presentation, it was clear
that most focus in emerging markets is on vaccines, generic drugs, and
consumer healthcare drugs, not on proprietary infectious diseasespecialty
pharmaceuticals. That said, we believe Sanofi-Aventis can
leverage existing marketing infrastructure into relevant HIV markets.
• Management indicated that North American partner Merck-Serono
expects to market Egrifta at an initial price per annual course of therapy
of US$23,900, a reasonable level on considering prices garnered for
other proprietary protein-based injectible drugs like Avastin or Erbitux,
though a clear premium to annual price for oral anti-retroviral HIV
drugs that usually sell for about US$6,000-to-US$10,000. We have
revised U.S. pricing assumption in our model, though we believe total
market opportunity could be offset by more modest HIV market
penetration, at least initially. We expect Sanofi-Aventis to price Egrifta
at a discount to U.S. price.