November’s 10Q for RxElite will be all about Sevoflurane distribution. I think it is important to look at the pricing of Sevoflurane now that SOUT has entered the market and examine the statements of SOUT’s leading competitor.
And it is looking GOOD!
RxElite is the sole representative of the new kid on the block, Minrad International, the third distRibutor of Sevoflurane. Sevoflurane is the most widely used inhalable anesthetic on the market and it has just gone generic.
The good news is there are only THREE distributors and SOUT is one of the three. There are no others on the horizon.
The Sevoflurane market in the U.S. is at conservative estimates $350M. In the Oppenheimer Report RxElite delivered a forecast of 11%-15% yr-yr market growth: that is $38.5M to $52.5M in market growth for RxElite.
Indications are prices are holding steady for a bottle of Sevoflurane. Oppenheimer’s channel checks indicate that pricing ranges from $205/bottle to $165/bottle, with the industry average being about $170/bottle.
When a generic drug comes on the market, typically there is a price erosion. This has not been the case with Sevoflurane – the reason is the cost of the process or the cost to make the drug.
RxElite is forecasting 11%-15% yr-yr market growth in volume.
RxElite has not seen a sharp competitive price response from Abbott or Baxter (the only two other distributors IN THE WORLD). From the most recent statement to shareholders it appears that Abbott does NOT intend to lower the price. They feel confident they can hold on to their market at this price.
This is good news for SOUT! They are growing their market share and the price of Sevoflurane is holding steady!
I think it is important to review what the two competitors are saying about the Sevoflurane market:
Tom Freyman, Executive Vice President, Finance, and Chief Financial Officer of Abbott Labs in his review of second quarter results on July 18, 2005, presented a risk analysis and noted the following:
So Sevoflurane actually has done fairly well compared to our expectations, at least. And I think most of the models that we look at, I think it’s actually in line or slightly above of what people expected. And as you know, we have modeled in a decline due to some new competition in the marketplace. But also mainly is due to some price actions that we took proactively, as you might recall last year, when there was another product launch in the market. So actually based on what we’ve been seeing and what we’ve been modeling, we’ve done fairly well and the share has been fairly stable. We continue to actively promote the product. We have a very strong promotional presence around that, and we have the vast majority of the major accounts, over 80% of the marketplace, that we’ve been able to retain. So what we’ve done in terms of price has really been the driver of the decline, which is fully expected. So net, net, we’ve done fairly well.
Pricing is expected to drop 5%-10% over the next few years, although this could be moderated if the organic growth of the market absorbs RxElite’s share grab.
Sevoflurane Facts:
- Sevoflurane is the most widely used inhalable anesthetic gas in the world.
- The price of Sevoflurane has not suffered significant erosion as it became generic.
- SOUT is on target with their distribution of Sevoflurane in capturing the projected 11 to 15 percent of the market in the U.S.
SOUT has sales agreements in place with the hospitals who purchase Sevoflurane.
The Sevoflurane revenue stream should be well established this quarter and revenue should reflect that.
It does not appear that the larger, well established distributors are interested in lowering the price of Sevoflurane. They make more money keeping the price high and giving a piece of the action to RxElite.
And so does RxElite!
This next 10Q will reflect the first strong distribution of Sevoflurane.
- SOUT Interview with CEO MP3:
http://www.stockguru.com/audio/sout10022007.mp3 - SOUT Interview with CEO Windows Media:
http://www.stockguru.com/audio/sout10022007.wma
RxElite has agreements with over ninety percent of the U.S. market for generic drugs. These agreements represent 50 of the top 75 generic drug buyers. See Profile.
Power Point for Investor Profile from Rx Elite
Source: RxElite Holdings, Inc.
RxElite Holdings, Inc.
Ph: (208) 288-5550
Toll Free: (800) 414-1901
Fax: (208) 288-1191 Investor Relations
Charlie Forshee, 215-885-4981
investorrelations@rxelite.com
Segue Ventures LLCAbout RxElite Holdings, Inc.: RxElite Holdings, Inc. develops, manufactures, and markets generic prescription drug products in specialty generic markets. These markets include products in the areas of anesthesia, sterile liquid dose drugs (including respiratory inhalation drugs, ophthalmics, and injectable drugs), and transdermal patch products.
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