An irreverent look at Wall Street
We are raising our Price Target from $73 to $85. We set our new target at 20x unchanged 2012E of $4.26 (3% above consensus’ $4.14). Following FDA approval of migraine, we are more confident in our above- consensus numbers, and we believe investors will increasingly focus on earnings acceleration in 2012. We hosted an expert call that supported our upside thesis. See Oct 18th “Expert call on migraine encouraging.”Overweight ahead of accelerating EPS growth. The migraine approval gives us confidence that Allergan's EPS growth will accelerate from 14% annual growth in 2010 and 2011 to 18-19% annual growth in 2012 and 2013. We expect Botox revenue expectations to grow as investors observe strong product demand and long-term EPS expectations to rise as investors better appreciate operating leverage from Botox.Why are we above consensus at $1.3B in 2015E Botox migraine sales? We have not evaluated other analysts' models, but there are likely a number of factors that may be holding back consensus expectations. First, some analysts may under-appreciate both patient interest in addressing chronic migraine pain and physician interest in giving Botox for migraine. Second, some believe that there is already a lot of off-label use of Botox for migraine, but we believe off-label migraine use has been limited to certain neurologists and select patients who have insurance coverage or who pay out of pocket. Third, some have not considered the ex-US sales opportunity, which should be at least 33% of U.S.Next major Botox therapeutic opportunity is overactive bladder. We expect investors to begin to focus more on Botox's next big therapeutic opportunity, overactive bladder. We anticipate data and potential approvals in 2011-2012.
Expert's assumptions imply potential upside to our street-high projections. We model $1.3B in unadjusted 2015E sales for Botox migraine, which we believe is a street-high number. POPULATION: Blumenfeld said that about 1% of the population (3M) suffers from chronic migraine, 25% more than the 2.4M we model. Importantly, for a patient to be defined as a chronic migrainer (>15 days/mo.), they only need to have over half of those days (8) be migraine; the other days need to be more than four hours of headache but they don't need to be severe (with nausea and vomiting). This could make it easier for some patients to qualify. PENETRATION: He estimated theoretical best-case penetration of 50%; we model 15% in 2015E. FREQUENCY: Blumenfeld said that Botox wears off after about three months, and he treats patients four times in the first year, followed by 3x in year two and beyond. We model 3x/year treatment. DOSING: Blumenfeld pointed out that insurance companies will have to pay for 200 U (2 vials) per patient for migraine to cover the 155 U in label; leftover has to be discarded; we model 155 U. Note that in Ph III, the mean dosing was 165 U, including some administration using "follow the pain" technique which can result in dosing up to 195 U.Efficacy is compelling and can improve over time.50% reduction in headache days has not been observed with other migraine treatment options. Some patients experience more pain relief with additional Botox cycles, suggesting Botox could have disease modifying effects.Payers will place hurdles. As anticipated, payers are likely to restrict access to Botox for migraine via prior authorization and step therapy.Please read on for 1) expert views on bear case efficacy arguments, 2) market drivers: off-label use not widespread, physician economics, and adoption.
Post a Comment