Merrill again:(buy)
Likely Impact of 2Q Erbitux Pancreatic Data Modest
Based on our scenario analysis of the Erbitux pancreatic cancer phase III study
with data expected in 2Q07, we believe there is likely potential for only moderate
downside to Tarceva sales if the data are positive. Our most likely scenario of
equal efficacy to Tarceva could result in US sales risk of $21 MM and EPS
downside of $0.07 by ‘10 assuming about 15% of US Tarceva sales are in
pancreatic cancer. Importantly, we expect Tarceva to maintain usage in all
scenarios due to its 70% discount to Erbitux, its more convenient oral dosing, and
physician comfort with the drug. Maintain BUY.
Wide Range of Downside Risk Depending on Scenario
If Erbitux shows a survival benefit comparable to Tarceva, which we believe is the
most likely scenario since both drugs work similarly, sales and EPS downside in
‘10 should be limited to $21 MM and $0.07, respectively. In the worst case that
Erbitux appears to work better than Tarceva, we estimate potential downside to
sales of $72 MM and EPS risk of $0.24 EPS in 2010. Overall, the stock could
move +$1.25 to -$3.00, depending on the outcome.
Pricing, Dosing & Physician Comfort Favor Tarceva
Irrespective of the outcome from the Erbitux pancreatic cancer study, we expect
Tarceva to maintain market share due to its lower price, more convenient dosing
and physician comfort with the drug. Tarceva costs 70% less than Erbitux in
pancreatic cancer at $3,084 per month vs. $10,000 per month for Erbitux. From a
convenience perspective, Tarceva is dosed orally once per day while Erbitux is
administered IV weekly. In addition, Tarceva has been on the market for a few
years, which has increased doctor comfort with administering the drug. |
