Excellent post.
Message in reply to:
Following is a post I read that I found most interesting. It is not my post so I will not attempt to answer anything related to it though I do believe originator makes many fine points:
"The shareholder alert could not have spelled out IPIX’s strategy and focus more clearly. I personally believe that IPIX science advancement will win long term over the short term criminal share price manipulation. I don’t have a crystal ball on the timing of this but IMO we will be in the dollars and not pennies as partnerships and science advancement unfold.
Leo is IPIX’s largest shareholder and has an extensive background in finance. He is focused on LONG TERM shareholder value and maximization. He is not going to let any short term share price manipulation influence his decisions on what is best for IPIX’s long term value. In regards to partnering for B-OM vs going it alone he has obviously weighed risk factors along with market projections and mathematics modeling. IMO he has his own over/under number calculated for doing a partnership deal vs going it alone. The good news on this is that LEO HAS OPTIONS, which is always a good thing to have when entering into any type of negotiations.
The following is for EXAMPLE ONLY with guesstimated numbers. There are several ways to value a company and using PE ratios is one of them. Most biotech companies do not have net earnings so they must be valued strictly on future potential. B-OM revenue would put IPIX in an elite position of profitability. The example for options 2A and 2B below would require more dilution than option 1 but would also bring in considerably more revenue to offset it. My GUESS for the cost of a B-OM phase 3 is in the $10 to $14M range. For example purposes I am using $12M for phase 3 costs and Outstanding Share count of 250M shares for Option 1 and 450M Outstanding shares for options 2A and 2B. The OS number is most likely a worst case number as Locust Walk could very well find IPIX a financial partner to provide phase 3 funding with less dilution than current funding options if IPIX were to pursue Option 2A or 2B.
Option 1 PARTNERSHIP DEAL for B-OM with $20M+ upfront plus 12% royalties.
Partner agrees to pay all Phase 3 associated costs for B-OM in addition to paying up front fees and royalties. . Projected OM revenue $600M year1 after trial completions and $1B year 2 and each additional year. $20M+ used by IPIX to advance B-IBD pill trials. After B-OM phase 3 completion IPIX receives $72M in year1 royalties and $120M year 2 with increased revenue years 3 and forward. With a low burn rate of $15M/year most of this revenue flows through as profit of $57M year 1 and $105M year 2. Using the low PE of 21 from royalty based biotech IONS this would equate to a stock price valuation of $4.79 year 1 and $8.82 year 2. These numbers are for B-OM ONLY and do not represent the enormous value of B-IBD and other Brilacidin instances and uses. It does also not account for the enormous potential value of Kevetrin. I personally believe that Option 1 is the most likely avenue that IPIX pursues as it would be quickest to market, least risk and consistent with IPIX’s stated direction as a royalty based biotech company.
Option 2A IPIX takes B-OM through phase 3 on their own with the option of negotiating a more lucrative royalty partnership after phase 3 completion with higher upfront $100M+ payment and royalty percentages 18%. Similar math as above but now year 1 royalty equals $108M and year 2 equals $180M. Net earnings of $93M and $165M. Using same PE of 21 but with 450M outstanding shares = year 1 SP of $4.34 and year 2 of $7.70. Note that even with considerably more dilution compared to option 1 that the SP estimates in both years 1 and 2 are very similar. The obvious advantage of this model is the higher up-front payments that could be used to accelerate the advancement of B-IBD and Kevetrin science. A completed phase 3 product that is market ready would most likely attract far better numbers than this example but you can plug in your own values and see that this is a very valid option.
Option 2B IPIX takes B-OM through phase 3 on their own with the option of taking B-OM directly to market on their own with a 15% commissioned sales force (manufacture sales rep model). Conservative WAG of another 15% for manufacturing and distribution costs netting IPIX 70% of revenue. $600M year 1 x 70% = $420M in year one IPIX net revenue less 15M burn = $405M net earnings. $1B x 70% = $700M revenue year 2 to IPIX less 15M burn rate = $685M net earnings. Same 21 PE as above using 450M outstanding shares = $18.90 SP year 1 and $31.96 SP year 2. Hmmmmm, this is getting interesting! Note that in the 11/13/19 PR it was stated that:
“Currently, about 2,500 facilities in the U.S. treat HNC patients undergoing chemo radiation regimens. As a subset, approximately 60 percent of all HNC patients are treated in just 500 of these facilities. A small sales force could thus be deployed to detail physicians and other care professionals treating a majority of HNC patients. This marketing dynamic further lends to the attractive economics for the development of a drug in this category of medical need.”
Leo is obviously working with more accurate numbers than I could possibly guesstimate but the point of the above exercise is that Leo has several legitimate options for advancing B-OM to market. ANY of the above options would bring shareholder wealth and the above examples are for B-OM ONLY. I personally believe that B-IBD pill formulation and Kevetrin both represent much larger market opportunities and multiples of the above examples for shareholder wealth.
Just some numbers to chew on tonight as you are digesting your turkey and waiting for the pumpkin pie to be served. Happy Thanksgiving to all Longs.
