Biotech Values

[mcbio]

Two years ago it was estimated that there was 300 million HCV cases worldwide. In the U.S. there are 3.4 million and in Europe there are 2.3 million.

The U.S. and Europe represent only about 2% of the entire HCV patient population? That seems surprisingly low to me. I figured that percentage would be much higher.

The paradox to this story is you have a small/mid cap company in complete control of all the assets and IP that is needed by large pharma to rule the future of oral HCV treatment in all genotypes. Who will make the first bid? Who wants to dominate the HCV arena the way GILD dominated HIV? Just sit back, relax and don't worry about hedging your position.

Hard to argue with much of this now as VRUS is in a great position. You just have to hope everything else in the clinic goes smoothly.

What's your estimated fair value for this company?

It's very hard to say, which is why I put it out there for the board. But, you have to consider what peak potential sales are for the 2nd/3rd gen nukes, how long it will be until VRUS starts to realize close to peak sales, whether or not VRUS will be taking the nukes to market themself or if they will be splitting revenue with a big pharma, and what a fair multiple is on their peak revenue, among other things. Are you thinking $5B/year in peak potential revenue for their pipeline of nukes? Not sure what a fair multiple is but I've seen anywhere from 4 to 8 with some of the larger bios. So let's split that and apply a multiple of 6 to $5B/year and that gets you a $30B valuation if we assume best-case that VRUS does this all on their own at some point when the nukes reach peak sales. Are you expecting 5 years or so before that peak sales mark? If they split those revenues with big pharma, then you're talking about a $15B valuation in 5 years or so, which would be about a triple in that timeframe if all goes well. Not sure if any of these figures are reasonable and just curious what others see as a best-case and a reasonable-case scenario for the VRUS valuation.

Of course, a lot of this is all probably moot because, if all does go well in the clinic, I'm sure they will be acquired well before their nukes reach peak potential sales. But, you still have to think about what a reasonable take-out price is for a big pharma/bio.