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Leonard Yaffe

 
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  • Making A Case To Be Cautious About Gilead Sciences [View article]
    I disagree with many points you raised in your commentary. My first thought is that your reasoning, had it been applied in other instances, likely would have caused you to miss out on the tremendous price moves in SmithKline in the 1980s (Tagamet), Warner Lambert in the 1990s (Lipitor), as well as Key Pharmaceuticals, Amgen, Celgene et al. You are correct that, without Sovaldi, Gilead's growth rate would have slowed; however, the company does have this drug, and it should be the largest selling pharmaceutical in history next year. Gilead is selling at less than 10x 2015 EPS(E), and I project the forward growth rate at 18%. In the next few weeks, top line phase 3 data will be presented on its HIV drug successor to Viread, TAF, and approval should be obtained for its second generation Hepatitis C drug, FDC. The company's pipeline includes drugs to potentially treat diseases that represent large market opportunities.
    Sep 5 10:28 AM | 6 Likes Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    I do not believe that was a significant factor. The biotech index corrected by 25% in that timeframe. There were also several unresolved issues regarding Gilead, in the minds of many investors, that have since been cleared up. Although Gilead's forward P/E was very attractive, stocks will decline in the face of uncertainty, and those with a negative view on Gilead were able to get investors concerned more readily at that time. One of the factors would have been the Congressional hearings, but my own experience has suggested this is more "headline news" than legislative effectiveness.
    Aug 28 10:20 AM | Likes Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    I agree with your comment that $84000 is not the future "per patient cost of therapy". As I stated, I expect FDC to be priced at a lesser total cost than current Sovaldi regimens. It remains to be seen if the ultimate course of therapy for treatment naïve, non-cirrhotic patients drops below 8 weeks. As third generation, pan-genotypic regimens become available, the potential shorter duration and ease of prescribing and treating should lead to an increase in patients receiving pharmacotherapy. Furthermore, given my projection of 19 million "US equivalent" patients world wide (out of an estimated total population with Hepatitis C in the 150-170 million range), there are years of prescriptions to be written. Also, although less meaningful in the short term, Gilead has an impressive pipeline that will augment earnings. Eventually, Gilead's stock will have another meaningful correction, like it did earlier this year from $84 to $65. If the fundamentals remain as they appear to be now when that happens, I would view it as a buying opportunity.
    Aug 28 12:04 AM | Likes Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    I expect the initial launch to be greater for several reasons....the pump has been primed, insurers are already on board with approving Hepatitis C pharmacotherapy, and doctors are comfortable with sofosbuvir and the patient qualification process (though it can be tedious). Furthermore, the elimination of Olysio in Genotype 1 patients is a win-win for everyone (other than JNJ). FDC will likely be priced at a per pill premium to Sovaldi, but this is irrelevant. The cost per therapy, due to the shorter course and the likely elimination of interferon and ribavirin, will be less. Len
    Aug 26 09:46 PM | 1 Like Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    I absolutely agree. Many of these patients were warehoused in 2013, awaiting Sovaldi. However, there are similarly newly diagnosed patients or those without stage 3 fibrosis who are awaiting FDC. Len
    Aug 26 03:14 PM | 1 Like Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    I agree regarding GS-9620. I am skeptical regarding GS-4774. Len
    Aug 26 02:56 PM | 1 Like Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    Hi---thanks for your thoughts. My research suggests significant warehousing, especially among the Genotype 1 patients (70% of US patient base), due to the unneeded additional medications. I would expect Sovaldi NRx and TRx to continue to fall thru September, and there will likely be inventory destocking. Inventory stocking for FDC may not start until early Q4.
    Aug 26 02:51 PM | 1 Like Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    As I mentioned, I look at P/E/G to assess the attractiveness of a stock, not market capitalization. I also do not look in the rearview mirror when assessing future prospects. My expectation is that Q3 Sovaldi sales will be down sequentially due to patient warehousing ahead of the introduction of the FDC (similar to what was seen in 2013, when patients treated dropped by about 50%). Over the next 6 weeks, we should get TAF phase 3 data and the approval recommendation for FDC. After the significant run-up n the stock, I won't be surprised if it pulls back, but I believe that the primary direction remains from the "lower left to the upper right" (Dennis Gartman).
    Aug 26 02:01 PM | 5 Likes Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    I agree that an increasing percentage of new pharmaceuticals over the next 10 years will be of "bio-tech" origin, as we have achieved most of our success with medicinal chemistry. Furthermore, unlike 30 years ago, when top scientists went to work for Merck, Pfizer, Bristol-Myers, Lilly, etc, there is now a greater preference to be with Gilead, Regeneron, Celgene, Biogen or the smaller start-ups. This is simply the evolution of the science. Therefore, the more traditional drug companies will continue to augment their pipeline with acquisitions of the "new kids on the block".
    Aug 26 01:08 PM | 3 Likes Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    Thanks for your comments. I expect private insurers to continue to be willing to pay for treatment, although they may place limitations regarding fibrosis stage. The availability of FDC should be a cost benefit to the insurers, and should be more attractive to patients (especially Genotype 1) and physicians. Merck's initial regimen, an NS5A and NS3/4A inhibitor, expected in 2015, should be competitive, as I have stated. You are correct in discussing the fact that many newly diagnosed patients will be with another insurer, perhaps Medicare, by the time significant symptomatology occurs. This could delay treatment, but this may serve to "extend the tail" due to increased longevity in our society. In the meantime, I believe that doctors will closely monitor newly diagnosed patients for fibrosis, and will recommend treatment as soon as it is justified. For the patient, the shorter course of therapy, the fewer side effects and the high likelihood of a cure present little obstacle. In the past, with a 40-70% cure rate, side effects of malaise, depression and anemia, a 24-48 week regimen, and a cost in the $35,000-$85,000 dollar range (depending on whether or not a protease inhibitor was used), 100,000 patients were treated annually in the U.S. Now, the pool of potential patients should be increased due to recommended screening of the 1945-65 birth cohort. I am forecasting 140,000 people in the U.S. to undergo treatment in 2014, and 210,000 in 2015.
    Aug 26 12:52 PM | 10 Likes Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    I agree regarding Q4'14, due to the introduction of FDC. Consensus EPS estimates for Gilead are $8.00 and $9.35 for 2014 and 2015, respectively, whereas I am at $8.25 and $10.75. I believe my Hepatitis C revenue estimate is $2-4 billion ahead of the sell side for 2015.
    Aug 26 12:36 PM | 4 Likes Like |Link to Comment
  • Gilead: Earnings Forecast Justifies $140 Price Target [View article]
    I think it is totally appropriate to sell for a lower price in those countries, eg India, Egypt, where cost is clearly a consideration. The bigger issue, pharmaceutical pricing in the absolute sense and on a country-by-country basis, is a very long discussion with multiple facets. That being said, I personally can more easily justify $85000 for a cure than $100000 for a cancer drug that extends life by 4 months. Len
    Aug 26 12:26 PM | 13 Likes Like |Link to Comment
  • Gilead Sciences Looks Like A Contrarian Short [View article]
    It was reported late yesterday that Bristol-Myers Phase 3 FDC trial for Genotype 1 Hepatitis C patients was suspended for safety reasons. The FDC included an NS3, NS5A and NS5B inhibitor, and, as with prior drug failures (especially amongst NS5B inhibitors), points to the difficulty in developing successful regimens. I continue to believe that the only significant competition to Gilead could potentially come from Merck (which had good news on its insomnia drug, Belsomra---we must be running out of good names!). I continue to recommend Gilead and Merck. My target price on Gilead remains $140. Also, remember that GILD has a pipeline and that the TAF top line data should be out very soon. TAF is likely to be equivalent in efficacy to Viread, but without the adverse renal and bone mineral density effects.
    Aug 14 11:00 AM | 3 Likes Like |Link to Comment
  • Gilead Sciences Looks Like A Contrarian Short [View article]
    I'll correct a few inaccuracies. There are an estimated 170 million people w/w with Hep C, which I equate to 19 million "full pay" patients, due to the prevalence of the disease in poorer countries. In the US, the estimate is 3-4 million, though a recent analysis (which did not include prisoners and was based on 20000 collected blood samples) put the number at 2.2-3.2 million. The cost of therapy in the US with ribavirin and interferon is about $95000. The cost of Sovaldi plus Olysio, used for some Genotype 1 patients, is about $150000. In the US, 100000 people on average have been treated annually, though this number was much lower (50000) in 2013 due to patient warehousing, awaiting the availability of Sovaldi and/or Olysio. Patient warehousing has again begun to occur, with the soon expected launch of Gilead's FDC, which will further eliminate the need for interferon. I also believe that a course of therapy (not a per tablet price) with FDC will be about 20-25% less expensive than Sovaldi plus ribavirin plus/minus interferon, and much cheaper than Sovaldi plus Olysio. Importantly, the FDC should be on the market before AbbVie's multi-drug regimen, which has some drug-drug interaction drawbacks. In 2014, I forecast 130000-140000 patients to be treated in the US, and I expect that number to increase by 40-50% in 2015, significantly higher than analyst projections. Merck will present some 4 week data at an upcoming medical conference, but one of the components of the regimen is Sovaldi, for which Merck hopes to substitute its own drug for FDA approval in a few years (though it should be on the market with an effective 2 drug regimen, that does not include an NS5B inhibitor, in 2015). I think it is important to keep in mind that Gilead's stock is trading at 9x 2015 estimated EPS, that the earnings growth rate beyond 2015 should approximate 18% annually, and that the company is given little credit for its pipeline (which will augment earnings, but not be nearly as important as its Hep C franchise this decade). I remain with a price target of $140. Len
    Aug 12 01:28 PM | 13 Likes Like |Link to Comment
  • NASH Is The New Hep C [View instapost]
    ICPT just reported an update on the FLINT trial results, and there was slight, statistically significant improvement in fibrosis vs. placebo, and the lipid profile appeared much better than earlier suggested. This round goes to the bulls. Len
    Aug 11 05:30 PM | Likes Like |Link to Comment
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