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DewDiligence

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DewDiligence

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Re: None

Thursday, 11/03/2005 5:57:38 AM

Thursday, November 03, 2005 5:57:38 AM

Post# of 257268
GTCB CC notes:

1. The milestone payments due from LEO are as follows:

$2M up front (non-refundable)
$3M for ATryn approval in pending HD indication
$38M for clinical/regulatory milestones in an acquired-deficiency indication
$30M for sales-based milestones
-------
$73M Total

2. The combined royalty and transfer payment payable by LEO to GTC is in the mid-to-high teens as a percentage of end-user sales. If, for the sake of discussion, we assume that GTC’s cost of goods is about 5% of the end-user selling price and we further assume that a 2.5% royalty is payable by GTC to third parties for IP licenses, then the net (pre-tax) profit to GTC comes out to about 10% (17.5-5-2.5) of end-user sales. The cost of goods and the royalty payable to third parties have not been (and will not be) disclosed, so my numbers above are just guesses. However, I think the 10% figure is close enough for practical purposes and it’s the net (pre-tax) profit margin on LEO's sales that I intend to use in my valuation arithmetic.

3. LEO will fund 100% of the phase-2 development in the first acquired-deficiency indication. The selection of this indication will be made in 2006. (Burns is probably the frontrunner, IMO.) When this program enters phase-3, GTC will have the option—but not the obligation—to fund half of the clinical-trial expenses. If GTC exercises this option, it will have access to all of LEO’s phase-3 data for use in the U.S. and Japan—territories not covered by the LEO partnership; if GTC declines to exercise the option, it will have access to only the phase-2 data. (GTC’s decision to exercise or not exercise this option will presumably depend on how important the European data will be to the FDA and the Japanese regulators. In any event, this decision is a long way off.)

4. GTC will begin serious discussions with prospective Japanese partners for ATryn in 2006. Japan is a large market for existing plasma-derived AT, so Japanese royalties could end up being a highly material component to the overall ATryn program by the end of the decade.

5. The U.S. phase-3 ATryn trial is proceeding according to plan and enrollment of the 17 new patients is expected to be completed during 3Q06. The analysis of the 35 historical cases in the control arm are expected to be completed by the same time. (Please see #msg-5609005 for an explanation of how the control arm will work.)

6. The EMEA review and inspections continue according to plan, with a decision expected in February. The remaining EMEA questions focus on the assays used to verify ATryn’s product-release specifications, and GTC does not anticipate any problems in this regard.

The CC replay can be accessed at:
http://biz.yahoo.com/cc/7/62157.html

Dew

“The efficient-market hypothesis may be
the foremost piece of B.S. ever promulgated
in any area of human knowledge!”

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