PaineWebber
November 13, 1997
AGOURON: ROBUST VIRACEPT SCRIPS POSTED IN OCTOBER
KEY POINTS
1. Robust Viracept scrips posted in October.
For the month of October, IMS reported prescriptions were as follows:
--Total scrips: 41,000 up 9% relative to 37,500 in September.
--Refill scrips: 25,000 up 12% relative to 22,400 in September.
--New scrips: 16,000 up 6% relative to 15,100 in September.
--IMS scrip data for Vriacept slightly better than expected. Viracept total prescriptions jumped to 41,000 for the month of October, slightly better than our expected target of 40,000 and representing a 9% increase over the prior month. With approximately 1/3 of sales being made to provider channels (e.g., private hospitals, clinics, HMOs, long term care facilities, and other institutions such as state ADAPs) not captured in IMS scrip data, we estimate that actual total scrips for October was approximately 54,000-55,000. We expect Viracept to continue to gain market share despite a more mature and competitive market.
--Protease inhibitor market continues to expand as evidenced by the increasing number of prescriptions in the overall market (approximately 145,000 total scrips in October compared to 134,000 in September representing an 8.2% increase). We believe some of the gowth is being driven by the use of two protease inhibitors as part of combination therapy given favorable clinical data released at ICAAC and the Hamburg AIDS meeting. As mentioned previously, Agouron has estimated that approximately 15% of Viracept patients are currently using two protease inhibitors.
--Viracept continuing to command a position as one of two leading protease inhibitors on the market. Viracept has captured an increasing market share of 28.3% in total scrips (up from 27.6%) and 29.1% in new scrips (up from 28.8%). Although Crixivan has retained its market leader position, its market share has dropped to 41.4% from 50.4% in May while Viracept's market share has jumped from 16.0% to 28.3% in the same period.
--New fromulation of saquinavir expected to fuel market growth. Fortovase, Roche's new soft gel cap saquinavir, was recently approved in the U.S. and is expected to be available in pharmacies by next week. The challenge with this new formulation is that its bioavailability (i.e., amount of drug which enters the bloodstream) of about 12-14%, although better than the current formulation (i.e., Invirase with 4% bioavailability), is still somewhat limited. In addition, a patient must take 18 very large capsules of Fortovase per day which are not easy to swallow. We are expecting that its most potent effect will be its use incombination with other protease inhibitors. Combination therapy of Fortovase with Viracept and two reverse transcriptase inhibitors has demonstrated preliminary yet highly promising clinical results.
REITERATING BUY (1) RATING
We are expecting a series of new clinical data, including more on the Viracept BID regimen, combinations of Viracept with other antiretroviral therapies (e.g., saquinavir-SGC, indinavir (Crixivan), DMP 266, etc.) and other data to be released at the 5th Annual Retrovirus conference and other meetings over the next six months that will support market demand for Viracept. With key trends including support from thought leaders to utilize earlier and aggresive treatment with triple combination therapy (with a protease inhibitor) reinforcing strong growth, we continue to expect the market for protease inhibitors to expand rapidly with Viracept capturing a significant portion of the market growth over time. We are reiterating our buy (1) rating with a 12-month price target of $75 based on applying a PE range of 40-45x (comparable to other biotech companies with high growth earnings) to calendar 1998 EPS estimate of $1.78. We arrive at the same price target by discounting fiscal 2000 EPS estimate of $4.00 at a 20-25%rate using a 25-30 multiple.
UPCOMING MILESTONES
Additional clinical data on Viracept (5th Annual Retrovirus meeting, etc.): Q1 1998
European approval for Viracept (Roche - European marketing partner):Q1 1998
Selection of lead compound (rhinovirue 3C protease inhibitor) for clinical dev: Q4 1997/Q1 1998
Annoucement of corporate collaborations: H1 1998
Phase II/III clinical results for Thymitaq (head & neck, liver cancer): 1998
KEY TRENDS EXPECTED TO DRIVE MARKET GROWTH FOR VIRACEPT
We expect the market demand for protease inhibitors to continue to be strong with Viracept capturing a significant portion of new growth over time.
Key trends that we believe will fuel future growth include:
--Combination therapy including a protease inhibitor as standard of care. The AIDS medical community has reached an undisputed consensus that combination drug therapy is the most effective therapy available to treat HIV infection. As mentioned in our October 2nd note, key thought leaders at ICAAC emphasized that combination therapy without a protease inhibitor is suboptimal. With combination therapy having become a standard approach, clinicians expect future thrapeutic alternatives will include combinations of greater number of drugs which will likely always include at least one protease inhibitor, the most potent available antiretroviral therapy.
--Increased use of double protease inhibitor combination therapy. As mentioned previously, Agouron has estimated that approximately 15% of Viracept patients are currently using two protease inhibitors. Double protease inhibitor combination therapy appears to be emerging among HIV though leaders as the next and perhaps most potent combination of antiretroviral drugs against HIV. Preliminary data from a clinical study of Viracept with Fortovase, the new saquinavir soft gel capsule, in combination with two reverse transcriptase inhibitors demonstrated a high response rate among patients.
--Future BID dosing regimen. As reported earlier, preliminary data form a Viracept BID dosing study demonstrated as good if not better response rates than that achieved with a Crixivan BID dosing study (100% response rate at 16 weeks for Viracept versus 75% response rate at 20 weeks for Crixivan). Both studies involved small patient populations with 9 of 9 patients in the Viracept study responding and with 12 of 16 patients in the Crixivan study responding. We are expecting data from a larger Viracept BID study (200 patients) to be released in early 1998.
--New market introductions with additional near term approvals. Viracept approval in Europe and Canada is expected by calendar Q1 98, with market approval in Japan also expected in 1998.
"Hit hard hit early". We expect earlier and more aggressive treatment to fuel growth in the patient population among both symptomatic and asymptomatic patients at early stages of the disease. After numerous studies, most clinicians agreed that early treatment with combination therapy would provide patients with the best opportunity to achieve improved clinical outcomes. This sentiment is reinforced by NIH/DHHS and IAS (International AIDS Society) guidelines recommending triple combination therapy as first line therapy in asymptomatic patients when CD4+ cell count is below 500 cells/ml and viral load is greater than 10,000 copies/ml (bDNA assay). Discussions are ongoing on whether this threshold should be lowered to a viral load of 5,000 copies/ml. Such a change in the recommended guidelines would significantly expand the market opportunity. The medical community's endorsement for early intervention will clearly urge the diagnosed but asymptomatic HIV population (currently approximately 310,000 patients or 1/3 of HIV infected U.S. patients) to seek therapy sooner. Moreover, those infected with HIV but undiagnosed (approximately 300,000 patients) may seek medical treatment if they feel they are at risk while knowing that early intervention with potent new combination therapies may control the virus if treated at an early enough stage. |
