Using the market multiple of 6X, our 2013 ATryn revenue estimate of approximately $226 MM and a 35% annual discount rate that we believe adequately compensates investors for the risks associated with GTCB, we derive a YE06 price target of $4.
This why I believe you can make money in biotech. The model above undervalues a success by combing a risk discount rate of return.
Put the discount rate at what you can get elsewhere.
Certainly more than 5% , but less than 20%. Use an index growth of 12-14% is probably about right.
That gives you your reward when measuring future income.
Assign a risk to GTCB striking out..If the reward to bet (investment) is greater than you have a truer measurement of potential winnings.
The above is somewhat simplistic, but even small companies are doing this in some fashion themselves when structuring deals.
See for example "Getting Real About Valuations in Biotech" Villiger & Bogdan , Nature Biotechnology April 2005.
A good discussion of binomial trees.
If one had the time to do this stuff in depth it would be nice to collect a bunch of different models, stash them somewhere, and have a list of proposed variables to plug in that everyone was familar with. Then guys and gals interested in a particular stock could divie up the work collecting and debating variable values like future sales, etc.
The other thing I still need to work on it a meta model so to speak. Once you have risk reward ratios for individual companies, how to you really measure your basket? Number and mix of stocks.
Since Dew has a math background maybe he will vol....
Err.... maybe I better keep my mouth shut. I might be asked to do something and my plate is full the next two months (transcribing old LP's to iTunes).
AI
Market Data 
Markets 
