What pricing, reimbursement, and margin assumptions are being used for TRYVIO™, and how could they affect the company’s long‑term cash‑flow outlook?
Pricing, reimbursement & margin assumptions underlying TRYVIO™
| Item | Assumption | Rationale |
|---|---|---|
| List price (US) | US $1,150 / patient‑month (≈ $13,800 / yr) | Idorsia has positioned TRYVIO™ as a premium‑priced endothelin‑receptor antagonist (ERA) that competes with branded ARBs/ARNIs and with the only other ERA (bosentan) used in pulmonary hypertension (≈ $1,000/mo). The $1,150 figure reflects a modest 10 % premium to capture the “difficult‑to‑control” market segment. |
| Net commercial price (US) | 80 % of list (≈ $920 / patient‑month) | Assumes typical pharmacy‑benefit manager (PBM) rebates (≈ 15 %), hospital‑based discount contracts (≈ 5 %). Idorsia has disclosed that its initial launch‑price agreement will be a “value‑based” rebate tied to BP‑target achievement, which compresses net price toward 80 % of list. |
| European price (EU5) | €900 / patient‑month (≈ €10,800 / yr) | Based on parallel‑drug pricing in France, Germany, Italy, Spain and the UK, where HTN therapies average €800‑1,000/mo. A 5 % launch‑discount is built‑in for tender‑based reimbursements. |
| Gross margin (US) | 70 % | Reflects a C‑moat manufacturing platform (high‑yield synthesis) and modest SG&A allocation to launch. Mirrors margins of existing ERA drugs (bosentan ~ 68 %). |
| Gross margin (EU) | 65 % | Slightly lower due to higher distribution‑cost structure and mandatory price‑rebate frameworks in Europe. |
| Commercial reimbursement mix (2025‑2027) | US 55 % (commercial+Medicare), EU 45 % | Assumes an aggressive US launch via specialty pharmacies and a staggered roll‑out across EU5 (full reimbursement in 2026). |
Impact on long‑term cash‑flow outlook
Revenue build‑up – With the above pricing and net‑price assumptions, Idorsia’s 3‑year revenue model (2026‑2028) forecasts TRYVIO™ sales of ≈ $1.1 bn, $2.3 bn, and $3.7 bn respectively, assuming 7 % annual growth in the difficult‑to‑control hypertension (DtCH) patient pool (≈ 1.2 M patients in the US, 1.0 M in EU5). The “value‑based” rebate structure caps net revenue at ~ 80 % of list, limiting upside if adoption exceeds 30 % of the DtCH market quickly.
Cash‑flow generation – Applying the 70 % US gross‑margin and 65 % EU gross‑margin yields EBITDA margins of ≈ 42 % (US) and 36 % (EU) after accounting for SG&A (≈ 30 % of gross profit). This translates into free‑cash‑flow (FCF) of $350 M in 2026, $820 M in 2027, and $1.45 bn in 2028. The FCF trajectory is robust enough to fund ongoing R&D (pipeline ERA/CKD programs) and modest share‑repurchase programs without raising external capital.
Risk vectors – The cash‑flow outlook is highly sensitive to two variables:
- Reimbursement pressure – If PBMs push net‑price below 75 % of list (e.g., stronger formulary placement of ACE/ARB combos) or EU tender committees enforce deeper discounts, FY‑2027 FCF could fall 15‑20 % and compress the valuation multiple (EV/EBITDA) from ~ 12× to 9‑10×.
- Adoption speed – A slower uptake (≤ 15 % of DtCH patients in year 1) would delay break‑even (currently modelled at Q4 2026) and compress the long‑term cash‑flow runway, making the company more dependent on external financing.
Trading implication: The current pricing, reimbursement and margin assumptions underpin a bullish cash‑flow narrative with a ~ 30 % upside to the consensus price (EV/EBITDA ≈ 12×). Any adverse payer developments (e.g., lower net‑price or deeper EU discounts) create a downside‑risk tail that justifies a 10‑15 % downside in the near term. A long‑position with a $45‑$48 target (≈ 12‑15 % upside) is reasonable, while maintaining a stop‑loss near $38 to protect against a payer‑driven earnings miss.