As any reasonably informed investor knows, VCEL is vastly undervalued just based upon the potential of its two FDA approved products, MACI and Epicel.
It is difficult not to believe that both products will more than double the revenues they achieved in 2016 over the next 12 to 18 months. That alone should increase the share price by 3 to 5 times its current level.
The amazing thing is that there is absolutely no value at all built into the share price for ixCell which was recently fast tracked. The spending for that product is now done but the huge potential remains. I think it is worth rereading a Zacks article from May 2015 pertaining to the potential of ixCell. They think it is a $1B product:
"With ixmyelocel-T, the Phase 2b ixCELL-DCM program continues on plan. Full enrollment was announced in January 2015. Enrollment took place at 30+ centers. It is clear to us based on the data Vericel has generated to date that ixmyelocel-T has utility in ischemic DCM. Management was clearly excited about the potential for the drug given the large market opportunity, with an estimated 170,000 patients seeking treatment, and "sweet-spot" focus for ixmyelocel-T positioned as an alternative to LVAD or heart transplantation. Assuming enrollment is completed very soon, we expect top-line data from ixCELL-DCM in the first quarter 2016.
Assuming this data are positive, we believe Vericel will be able to partner the drug for a Phase 3 trial to start in 2016. We believe the Phase 3 trial will take a similar two years to enroll and report data, putting the potential NDA in 2018 and approval in 2019. Approximately 0.6% of the U.S. adult population is classified NYHA Class III/IV. Approximately 15% of these patients have DCM and approximately 60% are considered ischemic in nature (source:American Heart Association). This equates to a target patient population of around 170,000, consistent with the graphic shown above.
If we model 5% peak market penetration in 2024, with ixmyelocel-T priced at $75,000 per course of treatment, this equates to peak U.S. sales of $600 million. We believe sales outside the U.S. will total $400 million, bringing peak worldwide sales of ixmyelocel-T in DCM to $1.0 billion. Given the suspected commercialization price for DCM around $75,000 per treatment, a bargain compared to the$150,000+ for implantation of an LVAD, ixmyelocel-T will carry greater than 90% gross margin once commercialized. That's the beauty of having an orphan drug designation. Those impressive economics are sure to attract a pharmaceutical partner, someone with an acute interest in interventional cardiology, if the data are good.
We believe Vericel can partner for this indication for $25 to $50 million upfront, $100+ million regulatory, and $250+ million in backend milestones, plus a handsome double-digit royalty on sales. We apply a 25% discount rate and 20% probability of success to arrive at a current NPV for the program of around $35 million. Should the program fail, we believe Vericel will kill ixmyelocel-T altogether. This mean, as noted above, regardless of success of failure, Vericel should be done spending significant R&D dollars are ixmyelocel-T in 2016."
