Cytodyn Inc (CYDY)

[Titan V]

This SA article from 2015 takes a stab at valuing CYDY.

Valuation

The HIV treatment market is estimated at $15 billion. Gilead Sciences (NASDAQ:GILD) currently dominates the HIV treatment market. GILD's HIV franchise is expected to generate sales of more than $10 billion this year. CYDY's PRO 140, if approved, will enter a very competitive market. However, PRO 140 has demonstrated that it has none of the problems that existing standard of care therapy has. Therefore, PRO 140 has the potential to establish itself in this competitive market.

In order to value CYDY, I have made the following assumptions. I have assumed that PRO 140 will be launched in 2017. I have assumed that PRO 140 will generate sales of $100 million in the first year itself. I have assumed sales growth of 20% thereafter, which is a reasonable assumption given its safety profile. Several of GILD's HIV drugs have experienced similar growth trajectory. Based on these assumptions, PRO 140 could become a blockbuster drug by 2030 and achieve peak sales of $1.28 billion in 2031. Complete valuation on drkkd.com.

CYDY has to give 5% royalty on net sales to Progenics (NASDAQ:PGNX) as part of its agreement with the company. The company has to pay royalties of up to 7.5% of net sales to Protein Design Labs, which is now part of AbbVie (NYSE:ABBV). The royalties have to be paid either until the expiration of the last to expire patent or 10 years following the first commercialization sale of PRO 140, whichever is later. I have assumed that CYDY continues to pay royalty until 2031 when the last of its patents for PRO 140 expire. I have assumed that PRO 140's sales drop by 80% once patents expire in 2031.

The probability of approval for PRO 140 is assumed at 65%, which is the average for drugs in Phase III stage according to data from Torreya Partners. The discount rate is assumed at 12% and continued growth rate to calculate the terminal value is assumed at 3%.

Based on these set of assumptions, I get a fair value of $4.64 per share for CYDY. On Friday, CYDY shares were trading at $0.895 so the stock has substantial upside from current levels.