Why Be Optimistic if the Payers Are Cautious?

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Bottom-Up

<p>Several recent developments confirm our thesis that Inflectra's US sales in 2017 will fall far short of management's 2017 forecast. First, Pfizer's proposed pricing of Inflectra is just below parity with Remicade. Second, the USFDA has pushed back its timeframe for developing a regulatory definition of "interchangeability". Third, physicians continue to express a reluctance to switch patients to biosimilars in the absence of clinical data typical of brand drugs. Further, we think that press reports that Teva (TEVA US) "wouldn't rule out an acquisition of Celltrion" overstate the former's potential interest in the company.</p><p>The shares trade at 61x 2016E EPS, and "only" 36x 2017's optimistic EPS forecasts.  </p>

Several recent developments confirm our thesis that Inflectra's US sales in 2017 will fall far short of management's 2017 forecast. First, Pfizer's proposed pricing of Inflectra is just below parity with Remicade. Second, the USFDA has pushed back its timeframe for developing a regulatory definition of "interchangeability". Third, physicians continue to express a reluctance to switch patients to biosimilars in the absence of clinical data typical of brand drugs. Further, we think that press reports that Teva (TEVA US) "wouldn't rule out an acquisition of Celltrion" overstate the former's potential interest in the company.The shares trade at 61x 2016E EPS, and "only" 36x 2017's optimistic EPS forecasts.  

Celltrion Inc

The Chickens Are Ready to Roost