Thursday, December 27, 2012 12:46:13 AM
I've tended to focus more on Kevetrin, and ignore Prurisol when doing valuation estimates, because of the large number of existing treatments for psoriasis. After doing a bit of searching and some calculations, I now realize that ignoring the value of Prurisol was a mistake.
According to the national psoriasis foundation, approximately 125 million people worldwide suffer from psoriasis, and about 25% of these, or ~ 30 million people, suffer from moderate to severe psoriasis. These 30 million people would be candidates for the newer, more expensive (and more effective) psoriasis medications, such as enbrel, humira, and remicade. However, only a relatively small percentage (perhaps 15%, or 4.5 million) of these 30 million people would have the financial means and/or insurance to pay for the cost of these medications.
So, I did a calculation assuming that 4.5 million people worldwide would use more advanced psoriasis medications, that Prurisol would have a 5% market share of these 4.5 million patients, and the annual cost of prurisol to patients or their insurance companies is $10,000 (the annual cost of enbrel, humira, and remicade is ~ $10,000 - $25,000).
This yielded an annual revenue of $2.25 billion. I further assumed a 75% gross margin, and that Prurisol sales would start in 2017, ramp up to the annual rate of $2.25 billion over a 5 year period, and drop to zero upon the expiration of the Prurisol patent. An NPV10 calculation using the above assumptions yielded a net present value for Prurisol of $5.9 billion dollars.
Using a 25% chance of success for Prurisol yields a risked NPV of $5.9 billion * 0.25 = $1.47 billion dollars, or about $10 per fully diluted CTIX share.
Adding this valuation to the current (conservatively) risked valuation for Kevetrin of $7.81 per fully diluted CTIX share that I calculated in an earlier post, and I arrive at a risked valuation of $17.81 per CTIX share, as of today.
A1
Number of Psoriasis Sufferers
List of Psoriasis Medications
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