Replies to post #183039 on Biotech Values

[stuartscott8900]

dew

it looks like "worst luck" valuation is close to what the market is saying.Hard to believe we are going to see the stock rise to over 70pps by launch as your valuation indicated.Your estimates of 38% market share is so far off from most analysts of high teens market share.

Why are you so much more bullish than most of the analysts?Would be interested in seeing a updated valuation model based on loss of novartis deal and lower royalty share than you originally indicated.

as always thanks for sharing your thoughts

[WorstLuck]

A blended royalty rate roughly equivalent to 4.5% of DAA sales. Sales of 3.0B seem conservative enough on most pricing strategy that ABBV might employ and are within street values. Results are around 85M per annum after tax.

Use a 6x multiple accepting long tail but allowing for other competitive entrants to take share, including other entries by GILD and/or ABBV/ENTA.

Accept $100 million additional valuation for Japan, although I have done no work on those numbers. Any other odd amounts not included are included with this number.

About 300M combined for milestones and cash. Add in a couple bucks/share for 493.

It could still be more conservative yet,

I did not look up the precise tax rate information. On a linear conversion basis, which may prove to be a too high a discount from the construction I modified (yours), it works out to roughly 83.5*6=501, or about 500M in round numbers. Using the above quoted 85 it would be 510M, which is still 500M in round numbers and allows for some error in tax calculation.

Note the milestones lumped together with cash as additional asset value.

Not included is possible taxation on the uncollected milestones. That would further reduce the value of the asset and is not something that you seem to have included.

As an additional note, a model that relies on too much precision in some areas while using numbers elsewhere that are by definition imprecise are in my view less valuable than constructions that are recognized as imprecise, and tend to be more conservative than they might be with more precision.