Here is the summary of Lehman Brother's report on Friday (10/3/97):
_"We have raised our estimates for Agouron Pharmaceuticals to .07 for fiscal 1Q and to .059 for the full year. Our FY1999 estimate moves to 1.40 and our FY2000 to 2.20 (fully dilluted and fully taxed)"
-"Our Viracept sales projections move to $67 million (from $60 million) for fiscal 1Q, to $310 (from $262 million) for FY1998, to $436 million (from $337 million) for FY1999, and to $490 million (from $451 million) for FY2000."
-"Much rhetoric has been discussed at ICAAC this past week regarding resistance when drug-experienced patients eventually fail protease inhibitors. We do not agree that prescription trends will suffer because patients breakthrough."
-"Protease inhibitors, as a result of their potency, have reduced the rate of AIDS-related death by 24%, and AIDS is now the second (no longer the first) leading cause of death for males between the ages of 18 and 44."
-"We do not foresee pressure from new agents nor resistance contributing to a slowdown in Viracept sales. The top and bottom lines of Agouron's P&L should grow, and we believe the stock will go higher. Buy rating maintained."
-"We will host a conference call at 11:00 AM EST today to discuss events from the ICAAC meetings."
SUMMARY
We continue to observe demand increases for HIV protease inhibotors. While not utopian drugs, they are clearly (in combination with other agents) the best opportunity for increasing the life of an HIV-positive individual. Therapy-naive patients should take the most potent combination available. Experienced patients may break through, though protease inhibitors have given them an option for added survival that they did not have before. We do not foresee htis trend going away, and no information from ICAAC (see our Note of 10/1/97) suggests a slowdown in future sales. We are therefore increasing our estimates. Our new revenue projections of $386.9 million for the year include $310.6 million in Viracept sales, while next year's $508.8 million forecast includes $436.3 million from Viracept. Total revenue in 2000 should approach $595 million, with Viracept sales contributing $490 million. The resulting EPS projections are increases to $0.59 from $0.13 for FY98 and to $1.40 from $1.25 for FY99. Note that these are fully taxed, reported figures, even though the company (due to NOLs amassed to date) will not pay taxes out of cash flow for approximately the next eight quarters."
"Remember, we monitor prescription trends in the HIV arena on a weekly basis. With one week still to be reported in September, total prescriptions for Agouron's fiscal first quarter are running 62% ahead of the prior quarter. In an effort to remain conservative, however, our revised first fiscal quarter sales projection of $67.4 million represents only a 55% sequential increase."
"Viracept Prescription Trends (Retail + Mail Order)
(FY4Q) (FY1Q)
Month Total Rx Month Total Rx
Apr 10,651 Jul 24,671
May 19,744 Aug 37,229
Jun 22,067 Sep* 23,344
Total 52,462 85,244
*Incomplete; data for the final week in September has not been reported. Source: IMS America."
"With respect to expenses, we are forecasting gross margin (from product sales) of 62% for FY1998, 70% for FY1999, and 75% for FY2000. Margin improvement will come from enhanced capacity at contract manufacturers (as we discussed in our Note on 7/24/97). Royalties to partner Japan Tobacco are 20% of sales this year, moving to 25% in FY1999 and 30% in FY2000."
CONCLUSION
"Issues regarding comments from the ICAAC meetings in Toronto this week will be discussed on our conference call today at 11:00 AM. It is our judgment, however, that demand for Viracept is not faltering. Until we observe a decline in physician practice, we will remain aggresive on the stock. Agouron is a Buy." |
