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Biotech Stock Mailbag: Exact Sciences

For argument's sake, let's be conservative and assume 2,800 patients is the addressable patient population. Cystic fibrosis is an orphan disease and the small subset of G551D patients is an orphan indication within an orphan disease. This should give Vertex wide latitude on pricing. Translation: Vertex could charge upwards of $200,000 or more per year for VX-770 -- similar to the cost of treatment for rare, genetic diseases offered by Genzyme, Alexion Pharmaceuticals or BioMarin.

Do that math (2,800 patients x $200,000 per treatment) gets you a peak sales potential of $560 million. No drug achieves 100% market share, of course, but it's not unreasonable to assume 60-70% share, which works out to VX-770 peak sales in the range of $336 million to $392 million -- so call it $400 million.

Upside: More cystic fibrosis patients treated with VX-770 and/or higher pricing. The downside, naturally, is lower pricing and fewer patients or lower penetration rates. It's difficult (impossible?) to accurately predict VX-770 sales right now, but guesses like a $400 million to $600 million sales range seem to be backed up with reasonable assumptions.

VX-770, if approved (another assumption) is potentially more of a game-changing drug in cystic fibrosis compared to Roche's Pulmozyme because the former targets an underlying cause of the disease. Pulmozyme, by comparison, loosens mucus or treats a symptom of the disease.

More tweets. @drive_gt3 asks, "Do you think a White Knight appears for Clinical Data(CLDA)? Just can't see it being gobbled up at $30 + the possible milestone $6."

I'm assuming R.J. Kirk, Clinical Data's chairman, largest shareholder and chief dealmaker, didn't purposefully leave a better offer for the company on the table. If Eli Lilly (LLY), for instance, had bid $45 a share for Clinical Data, Kirk would have had no qualms declining Forest Labs' (FRX) $30-a-share proffer. That makes sense, right? Sure, a higher white-knight bid is possible, but likely? I don't think so.

Sounds like the terms offered by Forest were the best Kirk could get for Clinical Data, so that's the deal that got done. Kirk, his affiliates and the rest of the Clinical Data board control more than half the company's shares and have accepted Forest's tender offer. With a head start like that, it's going to be almost impossible for any outside shareholder group to derail this deal. The class-action lawyers are kvetching, of course, but they're just blowing hot air.
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