Wildhorses;
You don’t post very often…But in my view your posts are always clear and well thought out. We seem to have a similar view on current events and the history of our investment in PPHM.
Almost all of my posts centered on my attempt to calculate the risk factors in this investment, the potential reward and when that reward will be realized. I’ve concluded a while back the risk/reward ratio was some number that I would be very satisfied with. The factors in my formula that I considered unclear where:
1- The amount of money needed to complete the planned trials and keep the lights on.
2- The potential non-dilutive sources of capital.
3- The potential for partnering and when.
4- Additional CMO work for Avid.
5- The status of the Gov’t contract
6- And most importantly…WHEN WILL WE REALIZE THIS REWARD.
So now we have some facts to consider:
1- The company just put $75M worth of shares on the shelf and the stock price is rising on good volume…!
Normally those two events are mutually exclusive or diametrically apposed…Surprisingly…we are up very nicely this week.
2- The company announced that the last patient was treated in the Cotara PII trial.
3- Dart’s purchase of ~4M shares
And some published opinions…
From the 12-17-10 S-3:
“We do not expect to generate product or royalty revenues for at least the next two years, and we may never generate product and/or royalty revenues sufficient to become profitable or to sustain profitability”
From LifeTechCapital’s 12-14-10 Update we have the clearest to date assessment of where the company is going over the next few years. Everyone invested in this company should read this…end to end.
Of particular interest to me is the table on page 33. That table provides their financial and time estimates for the company to fiscal year 2015.
From that table the following estimates were provided:
Contract Manufacturing:
Both the company and this analyst put the revenue for the fiscal year ending on 4-30-11 at approx. $10M, the analyst then project revenue to increase by ~ 8-10% annually.
In my view this is impossible to assess; so the best I can conclude is that the company will continue to try to increase Avid revenue.
Government revenue:
This confuses me a bit…because the table is based on fiscal year and the Gov’t contract is not, so I’m not sure if I agree with these numbers. However…It appears that he estimates that the two additional extensions will be executed and will end in FY2013. He then estimates that there will be some $2M in revenue in FY2014 & FY2015…???
I think that there are three major outcomes:
1- The contract can be terminated or down-scoped after 3/2011.
2- The contract can continue/extend to the 5 year limit.
3- The contract can be modified/expanded after 3/2011
I think that most of us will be rooting for door number three…!!!
Cotara:
Mr. Dunn estimates that there will not be any revenue from Cotara until FY2015, at that time he estimates:
For the U.S.: ~ $13M
For the ROW (I assume Rest of World): ~$6M
WELL…
Here are my thoughts…Such as they are…!!!
In one of Mr. Dunn’s previous updates he estimated a world wide market for Cotara at about $700M and estimated revenue to PPHM at around $35M. I performed an analysis a while back and posted it on this board. Mr. Dunn and I came to the same conclusions, though we used different formulas…Hmmmm…were is the disconnect…???
The U.S. numbers appear to correlate well with the world wide addressable market. What’s wrong…??? I believe that Mr. Dunn is being conservative in that the ROW value is based on the Stason agreement only (Their portion of the APEC countries).
In my view the missing piece is the E.U. market/agreement. That will add the missing ~$13M-$16M in revenue…My guess is that…After the E.U. contract is signed, Mr. Dunn will issue a new update with a higher target price.
Bavituximab:
There is not a lot of information to review, but we seem to be in the same ballpark.
Shares outstanding:
Well it looks like we both blew this one big time…!!! I estimated the number of shares to be around 65M at the end of the NSCLC trails…We are there already…!!! You can read Mr. Dunn’s estimates in that table on pg 33.
FWIW
I feel that the Cotara E.U. will be inked soon. (Soon being any time between right now and mid 2011)
I wish everyone on this board good health, peace and happiness during this holiday season…
And may this coming year be a prosperous year for us long suffering longs…
Regards
Golfho
AI
