PCSK9 Dampens Appetite for Aegerion Pharma Stock Print E-mail
By Brian Wilson - Lead Contributor   
Monday, 25 November 2013 10:45
Investors who follow Aegerion Pharmaceuticals (NASDAQ: AEGR) may have noticed that it has been tested by the bears a few times in recent weeks. Although the stock is still solidly up for the year (+176% YTD), investors are starting to get a little worried about the $2 B valuation that remains on a stock that may see viable competition from big pharma. Juxtapid, Aegerion’s only FDA approved drug, constitutes the bulk of this company’s valuation.

From a previous note:

Juxtapid (lomitapide) is an inhibitor of the microsomal transfer protein (MTP) – a protein that is involved in the assembly of the lipoproteins that correlate directly with low-density lipoprotein (LDL) levels. Patients with HoFH have a genetic mutation that interferes with their natural ability to lower LDL in the body when necessary, which makes heavy reduction of LDL necessary for long-term patient survival.

Although Juxtapid will only sell into a patient population of ~2,000, the pricing is what makes Aegerion’s strategy impressive from a financial standpoint. At a price of $295,000 per patient per year in the United States, we can estimate peak sales revenues of $600 M in the US alone. Expand this into a worldwide population and we have an orphan drug generating $1 B in annual revenues. Another important factor to consider is that Juxtapid can be sold at a low COGS, meaning that Aegerion’s earnings figures should be extremely high in comparison.

In the 3 months ended September 30th, 2013 (3Q 2013), Aegerion posted some decent financial figures that should support the stock to some extent. Revenues for the quarter came in at $16.3 M, representing over 200% quarter over quarter growth from 2Q 2013. COGS was about 10% of net sales.

View the 10Q for yourself here (link)

A premium on the valuation of Aegerion is justified given the incredibly comfortable position that Juxtapid is in, although a recent Bloomberg article (link) drew more attention to competing drugs in development by larger pharmaceutical companies.

PCSK9 Inhibitors

PCSK9 inhibitors are already used to improve LDL metabolism in patients with compromised liver function. Juxtapid essentially performs the same function, but through a different mechanism of action. Nonetheless, Aegerion investors clearly don’t like the idea of big pharma encroachment on Juxtapid’s field.

The Bloomberg article also pointed out an announcement from the FDA that eliminated the need for cardiovascular risk studies for PCSK9 inhibitors being developed by Amgen (AMGN); Sanofi (SNY); and Pfizer (PFE). This decreases the time-to-market of these drugs by a few years, and moves the threat closer to Aegerion.

Even if it is shown that PCSK9 inhibitors are best used in conjunction with Juxtapid, this may threaten the drug’s incredible pricing power. The current valuation of Aegerion incorporates the current situation, with no pharmaceutical competition in the space (other than the less effective drug Kynamro).




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