Biotech Values

[DewDiligence]

The gross margin on generic Lovenox is highly dependent on volume because a large part of the production costs are fixed. Based on the pricing information to date, NVS will probably sell syringes for around $60 each. At NVS’ initial launch volume of 35-40% of the US market, I estimate that NVS can produce a syringe for about $12, which yields a 20% COGS and a gross margin of 80%. These are the figures I would recommend modeling for the time being.

(In my hypothetical best-case scenario in which NVS supplied 80% of the market at a per-syringe price of about $50, the production costs would be spread over about twice as much volume and would thus be about half as much per unit. If the variable production costs such as API and shipping are small compared to the fixed costs, the lower bound for the production cost in this hypothetical scenario is about $6 per syringe, for a gross margin of 88%.)