Thanks. Here's Merrill:
Expenses cut, Erbitux set to rebound
1Q07 EPS of $1.33 was in-line with consensus and our estimate, primarily due to
lower expenses, which are likely to increase going forward. Importantly, 1Q07
Erbitux revenues of $160.1 mn were below consensus, but above our estimate of
$158 mn, suggesting Erbitux may begin to rebound due to positive data and less
Vectibix competition. We are raising our estimates only slightly, as we had
previously accounted for reduced Vectibix competition. Maintain NEUTRAL.
Spending likely higher going forward
1Q07 EPS was in-line based in lower expenses, which are expected to rise going
forward, in particular due to salesforce expansion. Total spending was about $20
mn below consensus, and about $16 mn below our estimates, including $6 mn
lower COGS expense, and $10 mn lower clinical and regulatory expense.
However, at least 6 large pivotal trials are ongoing, and 27 new sales reps will be
added by ASCO, representing significant expense.
Final CRYSTAL data may boost front-line use
Final progression-free survival (PFS) data for Erbitux in front-like colorectal cancer
(CRYSTAL) will be presented at ASCO, potentially boosting physician awareness
and revenues. If final PFS approaches 10.6 months for Erbitux vs. 6.2 months for
placebo, front-line use in patients not tolerating Avastin could ramp more quickly
than expected.
Raising estimates slightly, $1.3 bn US Erbitux revs in 2009
We had previously adjusted for decreased Vectibix competition, thus our
estimates change only slightly going forward, mainly based on higher license fees
and milestones. Non-GAAP EPS (ex-options) increases slightly to $1.37 from
$1.32 in 2007, to $1.54 from $1.48 in 2008, to $1.81 from $1.76 in 2009, and to
$1.94 from $1.91 in 2010. |
