Monday’s news is incrementally positive, with analysts estimating the potential for approximately $33 million in annual Omontys revenues from the DSI Renal agreement, assuming full penetration into DSI’s 80 dialysis centers and a discount of about 15% to Amgen’s (NASDAQ:AMGN) Epogen. As Medicare continues to pay less per dialysis patient (the “bundle”), we believe dialysis providers will prefer lower-cost products (like Omontys vs. Epogen) to increase or maintain long-term profitability.
The main event for AFFY would be an expanded supply contract with Fresenius Medical (NYSE:FMS), one of the two largest dialysis provider in the U.S. For reference, Fresenius has 2,100 dialysis centers across the U.S., 20x larger than DSI Renal. Importantly, analysts are not modeling in a long-term supply agreement with FMS, and if one should occur, whereby Omontys can gain a disproportionate share of ESA use in FMS centers, there would be significant upside to estimates for AFFY. Expect shares of AFFY to continue to trade higher throughout the week into the company’s presentation on Thursday at 1pm PST. Upside could continue through Friday if the company notes that prescription trends in November were, in fact, an anomaly, and that they continued substantially higher in December. Official prescription trends for Omontys in December should become available in the middle of this month. Note that the stock should continue to trade around prescription trends as Omontys continues to roll out in the marketplace, and a larger supply contract with FMS would send the shares higher, if announced.