One Grand for an AVXL Share? Come On.
Ok, for fun (Did you read that? For FUN.), let me lay out some numbers. Readers, on their own, with their own individual numbers and perspectives can tweak and amend these as they see fit.
First, let’s call the game and toss in the towel. What happens to the share price of AVXL if the three upcoming clinical trials fail? Simple. On your spreadsheet or calculator, enter the number of dollars you’ve used to buy your AVXL position, the multiply that times 0. End of game. It was nice, while it lasted.
Or, presume that all three trials turn out well, with favorable efficacy and adverse events data. That would mean Anavex 2-73 gets approved by the FDA and will be used to prevent or treat Alzheimer’s, Parkinson’s, and Rett syndrome. What might be the pecuniary implications for AVXL shareholders, present or future?
In valuation calculations, a base number must first be decided, the eventual number of outstanding AVXL shares that can be traded, the number of shares to which dividends will be divided and earned.
Presently, according to the Ihub Anavex data box, there are presently 42,100,000 shares being traded. For our calculations, we could use that hard number. But to be conservative, to account for future share number dilutions (should there be any), I’m going to presume an eventual outstanding share quantity of 100,000,000. If the share count stays at 42.1 million, just multiply projected share prices and dividends by about 2.3.
Ok, 100 million shares will be in play. Next, let’s try to figure out annual corporate revenues. To do that, we will first need to know the sizes of potential patient pools. How many have the diseases Anavex will treat?
Let’s start with the biggest affliction in the Anavex spotlight, Alzheimer’s disease.
First, what are current total Alzheimer’s care costs? One online source says, “The cost of caring for Alzheimer’s patients in the U.S. is estimated to be $236 billion in 2016. (Alzheimer’s Association) The global cost of Alzheimer’s and dementia is estimated to be $605 billion, which is equivalent to 1% of the entire world’s gross domestic product.”
The costs for this one disease are monstrous, and will only continue to grow as populations continue to age. Keep these numbers in the conceptual frame.
An online source claims that about 44 million have Alzheimer’s today, across the world. Not all of these will be taking Anavex 2-73. Let’s presume only half, rounded to a nice 20 million.
Next—and this is where things get really iffy—we need to estimate how many dollars Anavex Life Sciences will gain each year from each Alzheimer’s patient.
On the high end, it would not seem unreasonable they could charge just half of annual treatment costs. One source claims $60,000 is a typical annual care cost. So, at a high end, charging but half of conventional care and treatment costs (presuming Anavex treatment allows a normal, unassisted living style), Anavex would reap $30,000 times the number being treated. Instead of 20 million, let’s presume only 10 million, worldwide, take and pay for Anavex 2-73. 10,000,000 x 30,000 = 300,000,000,000: Three hundred billion dollars of annual corporate income.
But that seems high. The cited estimate of total Alzheimer’s costs in the US each year is $236 billion. But there are equal or exceeding numbers of Alzheimer’s patients in Europe and the rest of the developed Western world. So, this number may be reasonable.
Still, seems way too high. I like to undershoot the numbers, so resulting errors emerge at higher levels. Let’s say Anavex Life Sciences gains but 10% of those income revenues, a mere $30,000,000,000, thirty billion dollars a year.
Or, punch it out this way. Presume that Anavex reaps just $5 dollars of income per day per American Alzheimer’s patient. A source says 5.5 million Americans have the disease. It is reasonable and conservative to presume an equal number of people in other Western countries have the disease. So, let’s work with 11 million patients, paying $5 a day for their drug from Anavex each year, worldwide.
In a year, Anavex takes in 365 x $5, $1825 per patient. Let’s presume $825 are manufacturing, advertising, taxes, and distribution costs, with a straight $1000 margin. In a year, that’s a corporate profit of 11million x $1000; a nice $11 billion.
Again, these latter numbers should be at the low end. Higher drug pricing would bring in proportionately more dollars. Readers can punch those on their own. Here, I’ll stick with these low-end numbers.
So, just from Alzheimer’s treatments alone, Anavex would take in $11 billion. How much of that might flow down in dividends to AVXL shareholders? Again, I prefer to be very conservative; I’ll presume just a 20% flow down, 2.2 billion dollars.
How much is that per share? 2,200,000,000 / 100,000,000 = $22
That’s for Alzheimer’s. What about the next biggie, Parkinson’s?
About 60,000 Americans have the disease. For our conservative projections, let’s presume Anavex will be treating just 120,000 people in all the world with this disease. Let’s presume again the cheap $5 a day patient drug cost (going straight to Anavex coffers). It’s the product of 5 x 365 x 120,000, a total of $219 million. Let’s presume, as above, that about 45% of that are pre-dividend costs, yielding a margin, profit, income of $219 million x 45% = $98.5 million. We can round that to a corporate annual margin from Parkinson’s at $100,000,000.
With that, Anavex is now clearing $11.1 billion a year in profits from both Alzheimer’s and Parkinson’s.
For Rett syndrome, let’s not go there. So few have the disease (thankfully), it could only be a minor fraction of any Anavex profits. We’ll presume none, here.
I said, I like to keep things very conservative, allowing actual events to play out at higher probable levels. With that, I’ll terminate this discussion with just two projections: AVXL share price, and annual per share dividends.
First, the dividends. With these calculations, Anavex Life Sciences Corp, each year, has big revenues of $11,100,000,000. I’ll conservatively presume that only 20% is distributed in dividends to shareholders. That’s $2,220,000,000. With 100,000,000 outstanding shares, that would yield $22.20 per share.
Resulting share price? At a 10:1 PE ratio, an AVXL share would trade in the $222 range.
That, to me, is the absolute lowest eventual AVXL price. It does not include any of the other diseases Anavex may treat. Two or three times as many dollars may flow down to shareholders, with doubling or tripling of these dividends and share prices. The 10 to 1 price to earnings ratio may be way too low for the present market. Many equities are presently at 20 to 1, so future AVXL share prices would be doubled, in the $400 range.
But, instead of just 20% of corporate revenues flowing to the bottom line, what if 60% did? That would, at the lowest income numbers here, yield an annual dividend of about $60 per share. At a 10:1 PE ratio, that’s a $600 share price. At a more current 20:1 PE, that’s a share price of $1200.
All of this is for only Alzhheimer’s and Parkinson’s, with minimal numbers. What if Anavex drugs potentiate and safely enhance dozens of other drugs, for cancers, cardiovascular diseases, psychiatric conditions, etc.? Might the number then be multiplied by an order of magnitude, x10?
And maybe eventual outstanding shares rise only to 50 million, not the 100 million used in the calculations above? Double, then, all the final price numbers.
And, finally, what if Anavex 2-73 or an analogue simply and safely solves the insomnia problem? One can, at this point, only guess (not estimate) the results of that for the company and Anavex shareholders.
An eventual $1000 share price is not unreasonable, by any means. It could be much more, all depending....
