Intellipharmaceutics International Inc. (IPCI)

[AngeloFoca]

I keep saying the huge unknown is the % of cost plus

Not so huge nor unknown... we'll use Mackie's figures so as to keep it neutral LOL.

According to Symphony Health Solution, sales in the U.S. for 12 month ended August 2015 for brand Seroquel XR were approx.
US$1.2BN. We are assuming market size would decrease by 35% to US$780M per year after its genericization. We estimate IPCI’s generic Seroquel XR would take max. 9% of the market and after that the market share would drop by 20% on yearly basis. We are assuming a gross margin of 80% and that IPCI and Mallinckrodt would evenly split the gross profit. Our estimates of IPCI’s share from its generic Seroquel XR sales in the U.S. from 2017 to 2020 are US$13.5M, US$21.2M, US$17.0M, and US$13.6M, respectively.

So if gross margin is 80% then cost of goods is 20% - the whole pie is $780 million... so if IPCI/MNK captures 9% of that it will gross $70 million... 20% of which is cost of goods or $14 million.

In a CAPTIVE AUDIENCE contract where both parties are locked in obligatory use of services... a fair amount of profit allowed is 20%... therefore 20% of $14 million equals $2.8 million manufacturing profit... or otherwise known as the PLUS in a cost PLUS contract.

An example of a Captive Audience contract was the PSE&G companies before they were deregulated... you had no choice but to use their services, so regulators "fairly" held them to a 20% profit margin... if this year they made less... then they could/would raise your rates the following year to recoup the difference.

I modeled this Seroquel XR potential a few weeks back and remember using low $700 million for total pie and gross profits around $58 million and the PLUS in the cost PLUS to come to ~ $2 million yearly.

But we are all guessing.