A little light reading for the weekend…
I started to compose this message/analysis several weeks ago. It was prompted by a post from sunstar about Roche and its market cap. However…Most of the things that I ponder, I ponder in glacial speed. So time has moved on and the analysis has morphed…A product of my thinking process and Wine…
In addition, over a year ago JGal asked an interesting question…This may address some of that.
There are several things that I would like to get my arms around and would like to get some feedback on:
On the Oncology side:
1- The time required to complete this new PII trial for NSCLC
2- The cost for this study
3- The potential market cap allocated to PPHM for a successful second line NSCLC treatment.
4- The time required to complete a PIII trail and FDA approval for first line use of this combo
5- The potential market cap allocated to PPHM for a successful first line NSCLC treatment.
6- The potential market cap allocated to PPHM if many solid tumors indication are approved.
On the Viral side:
This to me is a little easer. Easer in the sense that I chose to only consider the TMTI contract for now. HIV research in my view is not controlled by PPHM.
The TMTI contract was awarded in June 2008 and the first performance period will end in June 2010. That implies to me that some time between NOW and June we will know whether TMTI will continue the research. I think sooner than later. If the research is yielding positive results then the need to continue this research, uninterrupted would require that the continuation contract be sighed well before June.
Someone please hit the Staples “That Was Easy” button.
Now for the tough stuff…
The stuff that PPHM is controlling directly, the Oncology side
1 - The time required to complete this new PII trial for NSCLC:
Design and registration period:
My SWAG (Scientific_Wild_Assed_Guess): 4 - 6 months
Start of enrollment to completion of enrollment:
Based on the three PII trials conducted by PPHM
Georgia Breast Cancer: From Initiation to completion of enrollment = 17 months – 46 patients
India NSCLC: From Initiation to completion of enrollment = 16 months – 49 patients
India Breast: From Initiation to completion of enrollment = 11 months – 46 patients
If PPHM were able to triple the number of sites from the previous trials it would still take a minimum of 14.7 months (Average of the 3 trials) to complete enrollment.
The worst case scenario would be the sum of the 3 trials = 44 months.
So what could it be…???
Anyone…?
My SWAG…I’ll go with the average…29-30 months
To which we must add the time from the last enrolled to the last enrolled data to provide meaningful data on survival. Lets call that 1 year minimum…Anyone care to refine this…?
So, in my view, a reasonable estimate of the time from design of trial through completion and meaningful data could be approx. 48 months…Gulp!…nearly 4 years.
Time for FDA approval:
You pick it…I’ll go with 6 months to 1.5 years.
Soooo…
To me it looks like PPHM could have Bavi used as an adjuvant for second line NSCLC in 4.5 to 6 years.
2 - The cost for this study:
A while back someone posted an estimate for a PII trial. My recollection was that the cost was approx 20K to 30K per patient. I think that that is more in line with pharmaceuticals and not necessarily applicable to Mabs. I have no idea what the cost is to produce Bavi so for now I’ll use the approx. cost of Avasten treatment as an approximation (Anyone care to refine this…???) I’ll call it 40K and add 15K for the data analysis and other trial costs (55K per patient…???) 120 X 55K = 6.6M
3 - The potential market cap allocated to PPHM for a successful second line NSCLC treatment.
I’ll need a little help here…
My cursory research found that there are 1.35M new cases of Lung cancer a year world wide and about 80% are NSCLC. That yields 1.08M annually. I don’t know how many patients have a successful outcome with the first line treatment or do not go on to the second line treatment so I will SWAG this at 60%. That yields 648K annually world wide. Lets further assume that PPHM will go for FDA approval first, Europe second and then the world. There are approx 175K new cases of NSCLC annually in the USA and using my same 60% assumption yields approx. 105K second line NSCLC cases in the USA. There are approx 300K new cases of NSCLC annually in the Europe and using my same 60% assumption yields approx. 180K second line NSCLC cases in the Europe. The cost…More importantly the amount of money PPHM receives per treatment…(More help needed here, please) Another SWAG but there are several Mabs; Avastin and Herceptin that cost about 50K per treatment. However there are significant dosing differences and perhaps other factors that could affect the cost. So for now I’ll go with a range of 20K to 50K
So…based on these SWAGs and further assume that PPHM can achieve a 30% market penetration for second line NSCLC that would yield a formula that looks something like this:
For the USA market:
Number of second line NSCLC patients (105K) X 30% market penetration (.3) X cost of treatment (20K to 50K) = 630M for the low side and 1.575B on the high side
For the European market:
Number of second line NSCLC patients (180K) X 30% market penetration (.3) X cost of treatment (20K to 50K) = 1.08B for the low side and 2.7B on the high side
For the World wide market:
Number of second line NSCLC patients (648K) X 30% market penetration (.3) X cost of treatment (20K to 50K) = 3.89B for the low side and 16.2B on the high side
Now to complete the question of market cap allocated to PPHM for a successful second line NSCLC treatment. I’ll arbitrarily select a low (15) and an average (25) P/E ratio.
For the USA market with 30% penetration:
15 X 630M for the double low side = 9.45B
25 X 1.575B for the double high side = 39.375B
For the European market with 30% penetration:
15 X 1.08B for the double low side = 16.2B
25 X 2.7B for the double high side = 67.5B
For the combined USA and European market at 30% penetration:
For the low side = 25.65B
For the high side = 106.9B
For the World wide market at 30% penetration:
15 X 3.89B for the double low side = 58.35B
25 X 16.2B for the double high side = 405B
4 – The time required to complete a PIII trail and FDA approval for first line use of this combo
I’ll go with a SWAG of between 6 and 8 years.
5 - The potential market cap allocated to PPHM for a successful first line NSCLC treatment worldwide.
With 1.08M new cases annually and as the Gold Standard (I’ll go with 65% usage) PPHM could be treating 702K patients annually. Using the same assumed treatment cost SWAGs of 20K and 50K and the same P/E ratios of 15 and 25 yields the following high/low range.
Low: 210.6B
High: 877.5B
I consider the low number to be more realistic and incredible at the same time…!!!.
6 - The potential market cap allocated to PPHM if many solid tumors indication are approved.
I can’t begin to think about that….!!!
Yet…
Soooo…JGal, I’ve shared my preliminary analysis of the cost, time frame and potential worth of our investment in PPHM. I invite all to provide feedback and if you JGal, have an analysis that you would like to share please post it.
A note to jessme…
I purchased my first shares of TCLN at the end of 2000. It was a tip from a friend who bought it prior to the run to $16.00. My first purchase was around $3.00 (Post split $15.00) and post run-up. When I invested I thought that Cotara and Oncolym, would give me a very nice return within a few years. So I certainly do appreciate your frustration in the slow progress, however if you have any experience in investing in biotecks and pharmas you know that it takes over a decade to bring a drug to market. As a matter of fact you posted a link a few weeks ago from Duke Clinical Research Institute that had a slide entitled “Increasing Drug Development Time” that has the average development time at 14.2 years. When the current management took over in 2003 and they refocused resources to a new Mab called Bavi a reset to the time to success should have been calculated. Part of this analysis is to help me wrap my arms around that issue. In addition you and others are not at all happy with the current management. The opinions range from bumbling idiots to outright criminals. Over the years I have rated them in the range between D and B. My opinion is that they recovered from there early blunders and recently have made some smart decisions, hence a current B rating in my Risk analysis. However if you truly do think that they are really sub par and you do realize that they will not be replaced then why wouldn’t you move on?
Conclusions and personal points:
I’ll take the worst case scenario…
It will take PPHM 6 years from now to get FDA approval for second line NSCLC treatment. In addition I will assume that they will draw down all of the remaining 45M left on the shelf. I will further assume that the share price will not rise above the current level of $3.00 for all of the shelf shares. That implies that PPHM must sell 15M shares to raise that amount of money. Current shares outstanding is 50M add 15M = 65M shares more or less at the time PPHM gets FDA approval.
NOW…For those of you who are not very keen on this stock or management I will state very clearly…
There still is a statistical possibility of failure in this clinical trial of about 33% and I realize that this could go into the pooper if Bavi fails.
However on the potential up side…
With the potential market cap after FDA approval (USA only market) using the double low number of 9.45B yields a per share price of $145.00
My first few posts on the board involved assessing the risk, which I still calculate at 20:1
Soooo…
If my $3.00 bet today can yield a $145.00 reward six years from now a 48:1 reward…vs a 20:1 risk factor…
I see that as a very good bet.
A classic high risk high reward scenario…
I hope that this painfully long post stimulates responses that will ultimately lead to a more refined model, that I will incorporate into an Excel spreadsheet that will be updated as events unfold.
Regards,
Golfho
