Replies to post #206257 on Biotech Values

[DewDiligence]

Re: ENTA's revenue and profit outlook

What do you think a reasonable revenue and earnings trajectory will be for them over the next few years (excluding milestones)?

Excluding the expected $80M milestone payments from ABBV (but including the expected Viekira royalties), ENTA will run near breakeven during calendar 2017, probably burning about $25M for the year. However, starting in 2018, ENTA's prospects will improve greatly as the second-generation G/P HCV regimen enters the market in the US, EU, and Japan.

I expect annual worldwide sales of G/P to peak at $4B in 2020. ENTA's annual royalty on G/P sales is tiered from 5% to 10%, where each tier is defined by undisclosed sales thresholds, so let's say ENTA gets an average 7% royalty rate in 2020.

7% of $4B = $280M. Say operating expenses and taxes consume $80M, leaving $200M of net profit.

Inasmuch as ENTA has no need to raise capital, it's reasonable to assume that ENTA's share count remains stable between now and 2020, so $200M of net income equates to about $9.50 of diluted EPS.

Applying a multiplier to the projected 2020 EPS is where the arguments are certain to become heated, so I won't even go there.

The bottom line, IMO, is that ENTA is cheap. Especially when you consider that ENTA’s wholly-owned EDP-305 may turn out to be a best-in-class FXR-agonist for NASH.