Biotech Values

[DewDiligence]

Further color on GTCB’s ATryn margins:

[From Yahoo]

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Re: CC notes:
by: DewDiligence
11/04/05 12:41 am
Msg: 23890 of 23891

>You threw out the 5% COGS giving a 95% gross margin.<

Actually, pass-through royalties to third parties are typically included on the COGS line of companies’ P&L statement, and doing this makes the gross margin my example 92.5% (not 95%).

>Are there any biotechs or any companies for that matter that have 95% gross margins or even 90%.<

Risperdal Consta and Botox are two that I know of in the 90% vicinity, and I’m sure there are many biologics that fit the bill. Please keep in mind that I’m assuming an end-user price for ATryn that is at least as high as—and probably a slight premium to—the end-user price of plasma-derived antithrombin in Europe.

Moreover, I’ve been talking about GTC’s net profit margin on LEO’s ATryn sales after the volume has ramped to a decent sales figure; at launch, COGS will of course be higher as a percentage of end-user sales because the fixed costs will be spread over less volume.

I figured that my 2.5% assumed royalty payable to third parties was conservative (i.e. it could well be less), and hence I figured that I had some slack on the 5% COGS. E.g., if the pass-through royalties are only 1% instead of 2.5%, then COGS could be 6.5% (instead of 5%) while still allowing a 10% (pre-tax) bottom line.

I would like to be able to pin this down further, but I’m not sure we’ll be able to.

[Posted as a reply to: Msg 23886 by wswc123]
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