Idenix Pharmaceuticals (IDIX)

[DewDiligence]

Cash-flow analysis assuming $200M of worldwide Tyzeka sales:

>Assuming--just for argument's sake--that Tyzeka/Sebivo does $200 million in sales worldwide, then what would be the earnings per share for IDIX based on those kinds of sales numbers?<

For the sake of discussion, let’s assume that $140M of the $200M in worldwide sales comes from the US and western Europe (Germany, France, UK, Italy, and Spain). On the $60M of sales from other countries, NVS is responsible for all expenses and pays IDIX a royalty on sales that I estimate to be 20%. Thus, the $60M in sales from other countries would produce $12M of income for IDIX.

In the US and western Europe, where NVS and IDIX split costs and profits 50/50, let’s say for the sake of discussion that the joint venture’s expenditure on sales and marketing during the period in question is $45M and the cost of goods is $15M. That leaves $80M of income to be split between the companies, or $40M for IDIX. Adding this to the $12M in royalties from the paragraph above gives $52M of income for IDIX.

Not included in the this analysis are:

1. Taxes. IDIX won’t have to pay any for a long time due to net-loss carryforwards.

2. Expenditures on post-marketing clinical development, which are split 50/50 between NVS and IDIX.

3. Potential sales-based milestones payable by NVS to IDIX. Although the thresholds and amounts of these milestones have not been disclosed, I doubt that the amounts would be material at the $200M sales level that is the basis for this discussion.

Regards, Dew