Good post, John. RE: Comparing launch of Lipitor-Warner Lambert to Agouron's launch of Viracept. Here's a post from AOL.
Subj: The real world and the market
4/26/97
From: LMoss AOL
You would never know it from looking at the charts, but Agouron is executing one of the most successful drug launches in pharmaceutical history.
Initial shipments to distributors consisted of 26,260 bottles, each containing a one-month supply of Viracept. As of about a week ago, close to 17,000 bottles had been reordered. That number, incidentally, is probably a better indication of the number of patients now using Viracept than is the prescription data, which is influenced by late reporting by pharmacies and is released ten days after the close of each reporting period.
Late reporting produces a greater error for a drug (Viracept) the sales of which are rapidly increasing than for another drug (Crixivan) the sales of which are relatively flat. Despite this, the available new prescription data indicates that U.S. sales of Viracept are more than double the worldwide sales of Crixivan. The two other PIs lag far behind. Crixivan has much higher overall sales (an estimated 140,000 patients worldwide), but
Viracept is rapidly taking market share.
I estimate that the sales of Viracept in the first six weeks of availability were about $20 million. To put this in some perspective, note a 4/23/97 article in the Wall Street Journal describing the launch of Lipitor, a cholesterol-lowering agent marketed by two large pharmaceutical firms, Warner-Lambert and Pfizer. "Analysts were excited by...(its)...rapid acceptance," the article noted. "On sale for less than three months, the drug achieved
$49 million in quarterly sales--an amazingly fast start, analysts said...(the drug)...is already capturing 13% of all new prescriptions for cholesterol drugs." One analyst is quoted as saying that the rapid growth of Lipitor "is incredible...This could become the fastest drug to reach $1 billion (in sales) ever."
Well, Viracept was taking 50% or more of new prescriptions for protease inhibitors after only three full weeks of availability at pharmacies. Sales in its first three months may well equal or exceed those during a comparable period of Lipitor's launch. The PI market as a whole is beginning a rapid expansion as early treatment becomes the new standard. And there is a real possibility that 2 PI combination therapy will emerge in the next few
months, further expanding the PI market.
The details of the Viracept launch have thus far flown below the radar screens of the financial and business media. When the facts eventually pop up on those screens, a lot of people are going to be surprised.
So much for the real world. What about the markets?
(Note to technical analysts and believers in efficient-market theory: Your retort that the market is the best expression of what is happening in the real world is hereby noted, so there is no need to post a note to that effect.)
In the last several weeks, while Agouron's fundamentals were improving so dramatically, the price of AGPH stock has dropped about 36%. At a price of 65 it is selling at one-fifth of what I calculate to be its present intrinsic value and one-tenth of what I believe its price is likely to be in 1999. (See my post of March 12, 1997 for the details.) The short interest increased to 1.9 million shares in mid-April, 14% of all shares outstanding,
and I suspect it is even higher today.
This is one of those moments that long-term investors cherish.
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