The Vytorin Slump: How Low Can They Go?
25 CommentsBy Ed Silverman // May 28th, 2008 // 9:44 pm
Call it the lipid limbo. Prescriptions for both Vytorin and Zetia continue to fall, according to the latest monthly data Schering-Plough posted on its web site tonight. From January through April, Vytorin scrips fell 22 percent, while Zetia declined 21.5 percent.
Meanwhile, Vytorin’s share of the cholesterol market went from 9 percent to 7.2 percent between January and April. And Zetia’s share fell from 6.7 percent to 5.5 percent. The drugmaker offered no accompanying remarks, but none are needed at this point, are they?
condor
Great work, Ed!
On mine, tonight, I’ve tried to make the case that this makes Schering-Plough a $16 to $17 stock for most of 2008, at best.
Take a look, and tell me what I’ve missed, one and all.
Anon
You are using the Jan. 31st stock price in your assumption, but failed to indicate or use the Pre-January 14th stock price. As you should know, SGP’s stock took a dramatic hit after the results of ENHANCE were announced on January 14th, as Wall Street rightly assumed that there would be a negative impact on the Rx’s and therefore on SGP (and MRK) stock. So, if you want to be accurate in your prediction of fair market value (although I am not sure this is the case as you seem to have a history of distorting the story against SGP), you should use the January 11th closing price of a little over $27.50.
condor
Actually, if you’d like to approach it that way, Anon., we need the IMS scrip data for December 2007 — pre the ENHANCE disclosure.
My thesis is that January 31 stock prices equate to the month-end January 2008 IMS scrip data — I’d be happy to re-run the figures using older, pre ENHANCE disclosure data — BOTH December prices, and December IMS data, and compare the proportions of each to April 30, 2008 — but that is essentially how I predicted the $14.41 (almost to the penny about FOUR weeks in advance of the closing on) April 2, 2008.
Cheers!
condor
Mine is too wordy above. the 3,205 figure for IMS scrips is January 31, as is the stock price. QED.
You may disagree with the rest of the assumptions, but it is “an apples-to-apples” numbers-set.
Anon
OK, use December all the way around. You won’t get to your assumed FMV of $16 - 17 / share.
My point is that the market assumed a negative impact on Rx’s post the announcement of ENHANCE on January 14th, so using the Jan. 31 stock price is misleading as the stock price had already taken a 25% hit from Jan. 14th to the 31st, and I guarantee that Rx’s did not go down 25% from 12/31/07 to 1/31/08.
Your use of a post ENHANCE stock price is MISLEADING !
Lipid Guy
“My thesis is that January 31 stock prices equate to the month-end January 2008 IMS scrip data”
Your thesis is wrong and Anon is correct, Wall Street had already factored in a negative Rx impact following the announcement of Enhance results on January 14th.
condor
The 10-Q for March 31, 2008 tells us:
“As of March 2008, total combined prescription share for VYTORIN and ZETIA in the U.S. was down approximately three market share points versus December 2007 from 16.9 percent to 14.2 percent. . . .” They also tell us “additional declines occured in April 2008.”
Ed has shown us those, tonight.
Take 16.9 percent (December 31, 2007 share), and subtract 7.2 percent (April 30, 2008 share). The decline is 9.7 share points for the FOUR months, or about a 59.9 percentage loss of share.
So let’s call it a 60 percent decline. Now, multiply the 60 percent times (.6), or the amount it affects overall Schering profits, very conservatively assuming that all other business feel no impact from the fall-offs in Vytorin/Zetia 2008 cash flows. Overall profits are thus very-likely to be down 36 percent at Schering in 2008 v. 2007, even if not a single additional bad thing happens in 2008 to the company. Said another way, 64 percent of the December 2007 stock price would be fair value.
Stock price in December? — Let’s pick, say, December 20 (about the average for the month):
Yep — $26.02.
$26.02 times .64 equals. . . . Yep: $16.65.
Dead in the middle of the $16 to $17 range I’ve called.
Make a liar of me. Seriously, I mean that in the sense of rigorous scientific inquiry.
I really would like to see what I’ve missed — but please don’t tell me the NEW APRIL IMS MONTHLY numbers are “priced into” the stock. That defies logic.
Other than us here assembled — lit by the eerie-glows of our monitors (and a few IR wonks at Schering!) no one KNOWS they exist, yet. They were not even released to the SEC tonight. Just ask Ed.
That will all happen tomorrow.
Then we will see.
Paul
Are you all patting yourselves on the back for prognosticating the decline of this stock?
Do you realize what it means? Just follow the dots and you’ll notice that you are:
- only a few degrees of separation from patients being hurt because they were taken off Vytorin for no major reason, thus possibly raising their CV risk
- or a few degrees of separation from thousands of people losing their jobs,
- or a few degrees of separation from future patients to be hurt by a slowdown in CV drug research because everyone is confused not knowing what to make of the confounding data,
- or a few degrees of separation from a slowdown in drug approvals and therefore in making it to the market to help patients.
Congratulations, you all called the numbers right!
condor
Hey Paul –
I am the only one claiming to “call those numbers, in advance” — so feel free to yell at me — and me — ONLY.
I can take it — I have thick skin. Rhino-like, in fact.
But before you do, consider these ADDITIONAL “dot points” (in response to each of yours):
▲ If that same patient is now on a medication with “outcomes” evidence to support its deployment — I feel very good about that. FABULOUS, in fact!
▲ A surrogate end-point study fails, and those of us watching it — WATCHING IT?! — are to blame for the job-losses? Not the K-1 couch-critters who envisioned a flawed study, delayed it for two years, and continued to ADD to the Vytorin/Zetia sales-forces?! [I didn't get THAT memo! -- I guess I didn't know that Ed allowed Mr. Hassan's blood relatives to post, here. . . . Ed. . .?]
▲ Again we are responsible for Schering’s “confused” study?! How so? Please elaborate. Use small words. I am apparently very dense. ‘Cuz, I just. don’t. get. that. at. all.
▲ But, yes — by all means — let’s approve lots of new drugs without solid evidence that they actually work. We’ll figure out how much to charge for them — based on how HAPPY the ACTORS — in the pastel-hued TV-spots, APPEAR to be. Good? Done.
Given yours, above — that all makes perfectly good sense to me.
In far fewer words, then Paul: false premises always lead to dubious conclusions.
Seriously — do you believe the above (all of your earlier dot-points)? I am abidingly curious.
I am sorry if mine is offensive, I mean only to mock the position — not the person — G’night!
Doc
Paul,
Virtually any patient on the simva/zetia combo can be switched to simva/ some other firate type product and maintain lower lipid levels.
Lesson to SGP and MRK? Play with the data, bob and weave in your corporate responsibility to the patients you so dearly claim to care for and guess what? MDs get pissed, in 2008 there are a nmber of other options to Vytorin.
Lipid Guy
Condor,
I assume that you are not a stock analyst, or have any real skills in math. Look over your numbers a bit more carefully. You say that the COMBINED market share in December was 16.9%. You then go on to use the Vytorin ONLY share in April of 7.26% to suggest a 9.7% share decline when the table that your blog links to has a combined share of 12.75%, 7.26% is Vytorin and 5.485% is Zetia. The Combined share decline from December to April is therefore 16.9% to 12.75% or ~ 25%, not 60%. In an earlier post you suggest that you are trying to do an apples to apples comparison, and therefore you need to compare COMBINED share to COMBINED share, not combined share to Vytorin share.
It appears that you are fabricating a logic stream to support your desired stock price when your first set of assumptions were rightfully shot down by Anon. This is an even more pathetically flawed analysis.
You may have an ax to grind against Schering, or maybe you just want the stock to decline to cover a short position, but your logic is flawed and appears to be intentionally misleading.
Lipid Guy
Doc,
Are you suggesting that lipid levels are the same regardless of whether someone is on simva alone vs. simva + ezetimibe? If you recall the news story from the weekend, John McCain was switched from Vytorin to generic simva and his LDL went from mid-80’s to mid-120’s.
Or, are you disputing the more fundamental lipid hypothesis that “lower is better” ?
condor
Re: Try the Decaf, there Lipid Guy.
Whoah — why the need to assign dark motives? The late-night data I used, on my second pass, was hurried — I made a mistake. I did not fabricate. Geez. Chillax. But to be clear, the first set is STILL apples to apples, and the second set yields about a $19 stock price.
So, again to be clear, here, your little ditty (above) does nothing to contradict my FIRST, more carefully-calculated, data set — which is where this train left the station, in the first place — on my blog, as it were.
$16 to $17: Yep.
That’s right — oh and BTW, SGP is NOW trading at $19.54, as I type this — off 50 cents on heavy volume. So — I guess the market must be “fabricating” these numbers as well.
Unless you are suggesting my goofy little blog is capable of moving a $32 billion market capital company. Are you? I think not.
Cheers — just the same!
Lipid Guy
The first data set used Jan 31st stock price, which as stated above is WRONG as it already reflects a 25% decline in stock price based upon the announcement of the top line Enhance data. Apples to apples would be December stock price and Dec. Rx data, or prior to any news on Enhance, vs. current. It is NOT, therefore, more Carefully calculated - it is equally sloppy or misleading. Pharmalot already cited a 22% decline from January, so you didn’t need to do much additional math, but when you did you use the wrong assumptions to come up with a 60% decline vs. the ~22% handed to you by Pharmalot. Simple logic should have told you that you were wrong.
Everything that you write is negative, thus the suspicion of ulterior motives.
And no, I don’t think that your goofy little blog or rants moves the stock value of SGP, since your calculations are so flawed to demonstrate the lack of value in relying upon your opinions. Everyone has realized since Jan. 14th that Enhance was going to have a negative impact upon SGP, and that resulted in a significant decline in stock value.
I will stay off the caffeine if you stay off the mind altering drugs.
condor
Okay, Lipid Guy –
The IMS data-set used January 31, 2008 scrips — so, I assume we agree that figure was priced into the January 31, 2008 stock price. Perhaps I was wrong — maybe we don’t.
Now, are YOU suggesting that the January 31, 2008 stock price DID NOT REFLECT (the full) reality? Then you and I AGREE, but we just see differing directional arrows — or vectors, if you will.
As I set forth on my “goofy little blog” (Heh!), I think the “full disclosure effect” of ENHANCE didn’t really occur until March 30, 2008 — after the ACC panel met, and the NEJM published. That led to $14.41.
So, I do think the stock price — in either December 2007, or from January to March 30, 2008 — was artificially “inflated”. I gather you think it was artificially “depressed”. My reaction? Perfect! That’s what makes a market: sellers and buyers.
Now, I think we both agree ACC punctured that balloon. Then, almost immediately, CEO Hassan (and Co.) went right back to work, spinning, dogding and weaving, making lots of statements about SALES levels of Vytorin/Zetia (and studiously AVOIDING statements about EQUITY INCOME levels) culminating most famously (or notoriously?) in the “Bob and Weave” shows on the Q1 Conference call April 23, and then at the Annual shareholders’ Meeting in Memphis, May 16, 2008.
Once again, that balloon — mostly of his creation — has been punctured, overnight, by actual IMS data sets.
But really — why so sore?
Working Doc
What is going on here? Does Lipid Guy mean “fat head”? And how about Paul? Blame all of Schering-Plough’s woes on the big bad media and the bloggers! If the company truly led with integrity and built trust every day, they wouldn’t be in the huge mess that they’re in. If they would simply have been driven by common decency instead of uncontrolled greed, they would be much better off. But no, it appears that the top dogs needed the extra time to cash in their multi-millions in stock before the public knew anything about the results of ENHANCE. Indeed, the “leaders” at SP are very weak as they seem to focus on the money in their own pockets rather running a successful ETHICAL pharmaceutical company. As for the physicians and the patients, there are several other ways to further lower cholesterol beyond the effects of low-dose statins. Zetia and Vytorin are not the only choices out there. The physicians are voting with their prescription pens and the patients are asking to be taken off these drugs. Neither wants to contribute in any way, shape or form to Schering-Plough’s money chest!
Lipid Guy
I have not made any statements supporting SGP, its leadership, or suggesting that their behavior re Enhance was appropriate. I am merely pointing out the flaws in Condor’s “logic”.
I also believe strongly in the lipid hypothesis that “lower is better” and therefore believe that ultimately Vytorin will demonstrate incremental benefit over statins alone and believe that taking people off Vytorin when there is no safety concern raised by Enhance is premature. I have seen people say that someone was taken off Vytorin and put on a statin, clearly indicating that they don’t know this market at all, since Vytorin contains a statin (simva). The Enhance trial was a small, poorly designed and executed study. It doesn’t, however, change my belief in Vytorin.
DeWaarheid
I find it exceedingly difficult to correlate stock price and the effect of news on that stock price as an accurate valuation of a company at that point in time. To be fair, you need to establish a fair P/E for that company/sector and then calculate the assumed earnings at that point in time to extrapolate a fair price. Stock prices tend to reflect the emotions of the market at the point of extreme news rather than a fair valuation.
Working Doc
From what I’ve seen and reviewed, ENHANCE was not small nor poorly designed. It may have been poorly executed and more poorly reported, but there’s no question it was a failure! In terms of lowering cholesterol, Vytorin does fine as long as the patients can tolerate the simvastatin. In my mind, pravastatin is the safest and atorvastatin the best choice for very high cholesterol. Both of these have been repeatedly well- demonstrated to reduce cardiovascular events. Unfortunately, ezetimibe hasn’t yet been shown to do so. If it does, then I’ll consider going back to using it. But that may be in 2012! For now, I believe it’s not worth it.
Fortune Teller
Rock Bottom! This is what happens when companies spin out of control. Rock Bottom!
Fortune Teller
Rock Bottom! This is what happens when companies spin out of control.
Lipid Guy
Working Doc,
Enhance was only 720 patients in total, which means ~ 360 took Vytorin and ~360 took Simva 80 mg. Statin outcomes trials have generally been in the multiple thousands of patients (e.g. 4S was over 4400 patients and Heart Protection Study was ~ 20,000 patients). Also, the entry level of plaque was too low to expect meaningful differences in a short period of time, plus IMT is not as good as IVUS. In Enhance Vytorin lowered LDL significantly more than simva alone, with no difference in safety profile. Unfortunately, it did not show any incremental benefit re plaque, but again I think that was a size and design issue. I agree, unfortunately we won’t know the results of a true outcomes study with Vytorin until 2012.
Agree Prava is probably the safest but not very effective; and Lipitor and Crestor are a bit more effective, with Zocor very close in LDL lowering efficacy.
Lipid Doc
ENHANCE was plenty big enough for an ASCVD trial. It’s not an outcomes study, but a surrogate endpoint trial. Efforts performed in the past have been substantially smaller and have been able to show a difference between groups. Even taking into consideration that ezetimibe’s impact on LDL-C is relatively small compared with a statin, the study had enough subjects. Agree that the IMT was on the low side, but think they were hoping for rapid growth in the heFH population. Therefore, they didn’t want it too thick to start with. Agree that IVUS is better, but MSP made the decision to go with IMT and IMT alone. Not a good move!
On a statin mg for mg basis, Lipitor and Crestor are more than capable of matching Vytorin. In the MSP studies, they typically made the studies huge under-dosed the comparative statin for a guaranteed narrow win. Besides, the problems they now have are all about not being forthcoming with the results. It really looks like they completely blew it all the way around!
Confused
Prescriptions for Zetia and Vytorin keep falling. Yet, according to recent SEC filings that are posted on the SP website, the BOD saw fit to approve over 1,000,000 stock option shares granted to the very same individuals who are the top executives in charge of this mess. Several of those who received these outrageous awards are the very same people who sold large blocks in the Spring of 2007. What’s wrong with this picture? SP is having some serious problems, so let’s reward the captains of the troubled ship!
Postscript
Schering-Plough and Merck deserve the mess they’re in. I wouldn’t be surprised to see their presciptions continue to drop and drop. Docs are fed up with them. Patients don’t want to be on these drugs. Everybody feels duped and deceived. They have destroyed the public trust and it will take them years to recover.