Macnqueso - I have been thinking a bit about all the trouble you went to give us some fun numbers to think about for the future value of CTIX. Without going into a real sophisticated model of valuation I thought it might be fun to use your numbers to come up with a gross theoretical value for CTIX stock TODAY. We all feel we are undervalued so what might the numbers suggest? The example I am laying out here makes some big assumptions too. But it is all just for fun.
I am going to use the first example from your second post (post 42290) which was the model for K with a 10% market share for just one type of cancer, i.e., lung cancer as follows:
700 million in gross rev
40% profit margin = 280 million
less 50 million in operating expenses = 230 million
P/E ratio of 20 = 4.6 billion market cap
150 million fully diluted = pps of $30.67
Assumption 1: this took 5 years from now to accomplish.
Assumption 2: we will use a discount rate of 7% to derive a present value of the PPS based on the 5 year timeframe of assumption 1.
Assumption 3: we will use the success rate for a Phase I drug candidate as another discount to the PPS. I noted some figures from the Tuft's site the other day. A Phase 1 drug has a 16% chance of making it to a full fledged marketed drug.
Assumption 4: this is a big assumption and that is that K ultimately succeeds as your modeled value suggests. Obviously it could fail and Assumption 3 illustrates that. If there is a failure all the numbers go upside down. But the idea is like a post mortem of a completed process. Think of it like this -Since K succeeded what should the value of the stock have been 5 years ago for this one type of cancer that now has 10% of the market?
Okay, now for the formula and numbers of this simplistic model:
K PV = Future PPS x 5year discount rate at 7% x likelihood of success.
or
K PV= 30.67 x .6209 x .16 = $3.04
Just another way to look at this although there are many loose ends here. Maybe the time value of money should be higher that 7% etc. But on the optimistic side I think we are far enough along that the 16% is likely higher and you based your model on just one type of cancer. Of course, B would have a higher figure used in Assumption 3 as it is the furthest along. And if P starts up in a Phase 2/3 as indicated, so would it. The point then is that if we were to put some reasonable numbers on all these drug candidates based on their progression through the trials, the current PPS is anemic compared to where it should be. But I guess we already knew that.
AI
