Avid Bioservices Inc (CDMO)

[golfho]

I beg to differ…

First lets look at NOTBOB17’s original question:

NOTBOB17
“OK! Let's increase the entertainment value of this board! Give me an amount for which YOU would sell PPHM in its entirety. Let the games begin!”

Simple question…But then we must make several assumptions. Correct me if I’m wrong but from your post I gather that your understanding is; what value do I put on PPHM today? I got that from this:

“---> you should however be aware of the fact that a $100 price would imply a $18b valuation! ... It simply makes 0.0 sense right now!”

I would agree that “NOW” as in today or the next few days that that valuation in impossible.

The question was…
“Give me an amount for which YOU would sell PPHM in its entirety.”

I also did not address that question verbatim as well, because I do not manage the company and would not sell it anytime soon. As a matter of fact I will never sell all of my shares. I will keep a token amount for the rest of my life. I’ll explain at the end of this post.

I started to write a post several weeks ago but, never finished it. It addressed this very question of what is PPHM worth now and in the future.

It differs significantly from yours.

First, what do we agree on? I have posted, almost exclusively about two things, the chance of success (RISK) & the reward. I put the chance of success at between 15% & 30% and you @ 22.5%. Perfect. Though I don’t understand your process. Mine was reposted recently.

Now for where we differ:

1 – “1 YOU HAVE A 25% (**) probability that PPHM will be worth $20b in 10 years (if BAVI really works!!!) “

Please justify the $20B valuation and the 10 year time frame. Before you think about that please read my evaluation further down in this post.

2 – “3. The probability weighted value of PPHM is therfore $3b in 10 years."

Please explain

3 – In my assessment I used a more conservative discount rate of 20% vs. your 15%. But obviously we started out with a hugely different future EV (Market Cap)


THE NEVER POSTED POST:


It’s time to revisit the question of…What is Bavituximab worth…and when?

Last week I wrote:
“I also addressed the rewards portion of the proposition with this:

“The broad oncology market numbers are the numbers that I used to determine the potential market for PPHM. In the future as these immunotherapies come into the market other drugs will lose market shares. I still believe that in 6 - 8 years Bavituximab can capture ~30% of the market so whatever total oncology number you use ($40B - $50B - $60B annually) I’m good with. In short I think that the market opportunity for us will remain about the same.”

“I’ll assume that the “total oncology market” will be at the lower number ~$40B. Bare in mind that some analysts see the immunotherapy oncology market alone as being worth ~$35B annually. For this example I will stick to the more conservative ~$40B X 30% = $12B annually. In order to establish an Enterprise Value for any entity you need to know certain financial information. For P/E you need to know what the profit margin is; we cannot determine that now. So I use EBITDA which is effectively gross income and I use a very respected institution (NYU) as a source for averages.
The website:
http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/vebitda.html

I selected the “Pharma & Drugs” category and it’s EV/EBITDA is 11.54 so now we take the estimated annual gross income of ~$12B and multiply by 11.54 and we get an EV of ~$138B. Let’s further assume that we get diluted to the full extent of the authorized shares of 325M the share price would be ~$424.00.
In summary, within 6 to 8 years the EV of Bavituximab alone would be worth ~$138B. That is one “BIG ENCHILADA©”. And YES…There is a statistical chance of failure of ~ 2 out of 3 to 6 out of 7.”

One of the most often used mechanisms that analysts use to evaluate an enterprise is to look at future earnings and then discount that by a certain percentage, times the number of years. 20% per year is the most often used discount. I applied that to the above estimate to arrive at a number that represents a value that PPHM should be at some time this year. The equation looks something like this: $138B X .2 = A, $138B – A = B (7 years away EV), B X .2 = C, B – C = D (6 years away EV)…You get the picture…!!!

So the calculations yield the following:
6 years to market cap equates to $58B for 2014
8 years to market cap equates to $37B for 2014

EXCUSE ME…!!! WHAT THE F***

Wait one freaking minute…

$58B divided by all of the authorized shares is $178 per share…!!!
$37B divided by all of the authorized shares is $113 per share…!!!

That just can’t be…!!!

OK…So let’s divide the target EV in 6 to 8 years by half.

That means that Bavituximab will be valued at the approximate value of Avastin when Roche bought the other half of Genentech…$65B…

OMG…

$65B would yield a EV of…
6 years to market cap equates to $21.3B for 2014
8 years to market cap equates to $13.6B for 2014

$21.3B divided by all of the authorized shares is $65.50 per share…!!!
$13.6B divided by all of the authorized shares is $41.85 per share…!!!


OK…So you say…Poor golfho…Has lost his marbles…

Maybe…Or…Maybe Not.

Let’s review.

Over a decade ago Dr Thorpe discovered that:
1 – PS is exposed on dead and dying cell. That exposure suppresses the immune systems response
2 – PS is exposed on most cancer cells and their blood vessels
3 – PS is also present on most enveloping viruses
4 – He then developed an antibody…actually several that attach themselves to the exposed PS
These Mab’s have been tested in 17 FDA approved clinical trials on ~500 patients. One was terminated (Prostate) and one was stopped (1st line NSCLC). Several had results that were somewhat unimpressive. Several had VERY impressive results. These VERY Impressive results were achieved in some of the most difficult to treat cancers.

During that time PPHM has refined its understanding of the Anti-PS MOA and has had that MOA validated by independent KOL’s.

Investigations into anti-viral are resuming.

So…Who does not see this as…ABSOLUTELY DISRUPTIVE…PARADIGM SHIFTING…technology…???

I see it as such…And yes there is, as far as my risk calculations are concerned a 15% to 30% chance of success.

Before someone post…Lets get to $3.00 or $4.00 first I would like to clarify.

What the above mathematical analysis states is…If a company will have an estimated revenue/EV in 6 to 8 years it should be fairly valued this year at X

So why are we at ~$2.40?
1- Uncertainty as to whether the science will be validated
2- Uncertainty as to whether the company can finance this effort to completion and no clarity on partnerships.
3- Uncertainty as to whether competition from other entities can diminish Bavituximab’s market share.
4- Hedge Fund’s market manipulation
5- Powerful interests actively working to slow/kill PPHM.


I’m sure I missed a few.

One last note:

Why won’t I sell all of my shares ever…?

Because I have a vision…Many years from now…I’ll be sitting in my rocking chair…Great grandchildren sitting around talking about life and the market when one asked…Did you hear that PPHM announced another forward split? Grandpas eyes light up. He slowly walks to his den and a few minutes later reappears with an aged slightly yellowed Scottrade statement. He sits down and softly says…I bought that stock at 29 cents…I still have some…Everyone turns to look at grandpa. A sad look on their faces…Someone whispers…Maybe it’s time we send him to that Home…Grandpa hands over the statement…His eyes slowly close…there’s a smile on his face…You couldn’t get rid of that smile with a jackhammer.

Regards
golfho