Replies to post #295710 on Avid Bioservices Inc (CDMO)

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3. EXOSOME Joint Venture – IPO Valuation HUGH

THE EXOSOME BILLION DOLLARS WORLDWIDE RAPID DEPLOY STRATEGY, we can only hope ;-)

Exosome blood test "first in" preventive early detection and post-treatment monitoring sector,
plus
the Exosome blood test "locating body part and stage of cancer" initial determination" and
"during-treatment monitoring" second sector.

I propose that for this disruptive technology in the overall cancer treatment cycle, we need to put a top notch management team in charge, teamed with a brand-name-recognized distribution partner.

Hence, Ronin should formulate a spin-off for the kit manufacturing and marketing operation, placed off-shore for cost and tax advantagse (the parent can always "loan those excess profits") and get a fair and instant valuation with an IPO.

Such IPO does then reflect on the PPHM share price by reference, not to mention the (for Peregrine) enormous publicity in a new a stock offer, and thus potentially accelerating the Exosome makrkets and even the step-child Bavi partnering.

Further, the Exosome Corporate structure should be set
60% Peregrine (input the IP, patents and initial process knowhow), with 9% distributed to PPHM shareholders by formula, retaining 51% stock control
15% Ronin, holding and appointing a majority in the Ex Corp board , and selecting the Ex Corp management, for the three year start-up period, and buying into the IPO
15% public offering
10% reserved for buy-in by the distribution partner, based on marketing performance milestones.

Now for contraversy, the 9% distributed as a special dividend to PPHM shareholders, that is excluding management held options and off-shore accounts, so here we just target retail long term holders and institutions, at distribution formula:

first 30,000 PPHM shares == 300 Ex Corp shares
next 70,000 == 200
all next 100,000s and fractions == 100 and fractional pro rata

PPHM shares at 300 million outstanding == 300,000 Ex Corp shares to be distributed (9% of total)
hence total common is 3.33 million Ex Corp shares (rounded, assumed for this breakdown only)

third year earnings, at $357million, or eps of $107, early trendsetter market, and excluding start-up expenses for the evolving Exosome markets, our Ex Corp share price then $1000 minimum, which means an IPO at astronomical, eh? -- here is high growth potential, way beyond the "initial trendsetter market fragment" that the $357million minimum is factored from above. AND WE HAVE A REAL NEW MANAGEMENT AND MARKETING TEAM. Hence IPO is feasable

Next, base lines of the current oncology market and diagnostics/testing parameters.

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geocappy & OtherGuy, Exosome too big, partner for distribution and separate management for joint venture manufacturing.

you must have been out for lunch, been there done that ;-)

Assuming a Binary test at a $150 price for the trendsetters market introduction (see my 1. note) ....

Working backwards
$150 sliced, at 100% mark-up by hospital and stand-alone MD practice, moving to next level down, at:
$75 distributor pricing for a name brand "biggie test market partner", at 40% profit margin, $7.50 distribution cost, 16.6% royalty,
and results in a manufacturing level or transfer pricing of:
$25 Peregrine Joint Venture manufacturer pricing, with costs including Bavi substrate (?) and UT license fee, plus off-shore deposited IP charge ($5?) -- noting a color printer cartridge is selling for $55 -- and possibly as complex as the exosome basic test kit –so our Binary test kit might be produced for $15 as a wild guess.

Assume 20.4 million tests from the trendsetters and cancer family initial marketing launch only, per earlier breakdown under "1. EXOSOME"

Hence, Peregrine potential pass through profit of $12.50 (16.6% royalty) and $5 (IP), at only 20.4 million kits just for the trendsetters and cancer family couples would amount to $357million annually, within say 3 years, and ramping up exponentially thereafter, but then with likely declining end-use pricing of say $98 in the USA -- and $50 elsewhere with EU socialized medicine, at cost-plus and zero mark-ups at the EU's GP offices and clinics.

Time to slice this $357 million in three year "trendsetter market opportunity" to reflect onto the Peregrine current crummy valuation in a flash – more ;-)

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EXOSOME pricing point/breast cancer

looks like 2013, from comments on NYT article

LizNewton, MA
What I want to know is why the testing in Israel is stated to be $100 - presume this means the BRCA testing and in the US, this test is held patented by Myriad genetics - the majority of it not covered by insurance and ran me nearly $3k out of pocket. Hopefully this ruling against Myriad will mean more at risk women can get this important test and not have to pay the ridiculous fees that I had.

http://www.nytimes.com/2013/06/14/us/supreme-court-rules-human-genes-may...
Nov. 27, 2013 at 7:26 p.m.RECOMM

tests for breast cancer in Israel are now twice a year, free for "at risk groups"

we have a goldmine, folks -- forget about 61 cents, the pending Reverse, or Bavi. but those folks called management have to get their act together.

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hey BOARD, comments pl on EXOSOME pricing

Rev 2.a EXOSOME PRICING POINTS
Exosome Binary blood test "first- to- market" for preventive early detection and post-treatment monitoring

Some field research nuggets, but what does it mean to you?

My question to four USA well-to-do entrepreneurs and professionals, age 40 to 62, as to value of such early detection test for cancer: -- the entrepreneur "priceless, would pay anything ie, $3000 a year", pressed for more reasonable price, he "thought $300 would be cheap" , his wife, a manager in an insurance company, being the youngest and the others with very expensive hobbies could not make up their minds, even with $100 I posed as reasonable. Needs some selling, as "universal" to all solid cancers and "accurate" might appear too good to believe? And likely it did not overly interest them. Hence, a 33% response rate assumed in the USA population earlier on (see 1. EXOSOME).

In follow-up questioning to a more representative cross-section:
one man gave a "$4,000" and does not want annual (?); two intelligent and personable middle class working women, ages 40-50, separately (!) came up with $200; a retired couple both thought $300, her mentioning that even at $100 and covered 80% by medicare many could not afford such (reality in this evolving USA now);

a 34 year old (plus minus 4yrs) psychiatrist with provocative legs and provocatively argued views (no mattter my facts!)--she thought any tests must be DNA based as cancer is inherited, so our test should cost $25,000 as such was a DNA defect tests for her fetus, a n d (priceless) most people do not want to know if they have cancer, "are in denial", as "having cancer would have them be shunned " -- adding "believe me, I have talked to my clients". Wow.

And worse, a 50 year old high spending wife of a 1%ter or 2%ter high earnings executive who in her earlier career had been in advertising, is college educated and with three children, whose in-law had died of cancer, could not make up her mind if she even wanted an early detection test, never mind come up with a reasonable price ("is it covered by insurance?") all that after 8 minutes of giving her the relevant information – "I have to know more about it to make up my mind" -- sounds like the psychiatrist was right, "denial".

One mid-fifties man offered a $300, two late 50s women did not want to have early detection (better not to know) until I laid out what an advanced cancer treatment really is all about (no price opinion).

Finally, one man did not care about price or public media or advertising information, would only follow what his MD might suggest. Might be key! So can a single MD practice draw blood (nurse has to be specially licensed in the USA for this).

And a new consideration, under the "pre-existing condition exclusion" now pending for USA legislation on health care, IMO many may not want a test on early stage cancer especially if at a young age 35 they did not buy health insurance.

Hence, let us assume the Binary test at a $150 point-of-use price.

TOO CHEAP? OR IF OUT-OF-POCKET CASH (not insurance-covered) THEN LESS?

NOTES:
Other Consumer-related Pricing Points:
consumer direct, with ads – ancestry prognosis, 5 companies, pricing range $99 to $199 (DNA), mid-point $150.
in hospital annual blood test, diabetics, $172
comprehensive blood test $450 for cardiac patient (follow-up)

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Update, Exosome Price, BOARD COMMENTS please

Rev 2.a EXOSOME PRICING POINTS
Exosome Binary blood test "first- to- market" for preventive early detection and post-treatment monitoring

Existing reference pricing points -- Consumer-related:
consumer direct, with ads – ancestry prognosis, 5 companies, pricing range $99 to $199 (DNA), mid-point $150.
in hospital annual blood test, diabetics, $172
comprehensive blood test $450 for cardiac patient (follow-up)

CONSIDERATIONS:
my question to four USA well-to-do entrepreneurs and professionals, age 40 to 62,:as to value of such early detection test: -- entrepreneur "priceless, would pay anything ie, $3000 a year", pressed for more reasonable price, he "thought $300 would be cheap" , his wife, a manager in an insurance company, being the youngest and the others with very expensive hobbies could not make up their minds, even with $100 I posed as reasonable. Needs some selling, as "universal" to all solid cancers and "accurate" might appear too good to believe? And likely it did not overly interest them. Hence, a 33% response rate assumed in the USA population. earlier on.

In follow-up questioning to a more representative cross-section:
one man gave a "$4,000" and does not want annual (?); two intelligent and personable middle class working women, ages 40-50, separately (!) came up with $200; a retired couple both thought $300, her mentioning that even at $100 and covered 80% by medicare many could not afford such (reality in this evolving USA now);
a 34 year old psychiatrist with provocative legs and provocatively argued views (no mattter my facts!)--she thought any tests must be DNA based as cancer is inherited, so our test should cost $25,000 as such was a DNA defect tests for her fetus, a n d interesting, most people do not want to know if they have cancer, "are in denial", as "having cancer would have them be shunned " -- adding "believe me, I have talked to my clients". Wow.

And worse, a 50 year old high spending wife of a 1%ter or 2%ter high earnings executive who in her earlier career had been in advertising, is college educated and with three children, whose in-law had died of cancer, could not make up her mind if she even wanted an early detection test, never mind come up with a reasonable price ("is it covered by insurance?") all that after 8 minutes of giving her the relevant information – "I have to know more about it to make up my mind" -- sounds like the psychiatrist was right, "denial".

One mid-fifties man offered a $300, two late 50s women did not want to have early detection (better not to know, might impact on insurance pre-existing conditions!!) until I laid out what a treatment for advanced cancer is entails (no price opinion).
Finally, one man did not care about price or public media or advertising information, would only follow what his MD might suggest.

And new, under the "pre-existing condition exclusion" now pending for legislation on health care, IMO many may not want a test on early stage cancer especially if at a young age they do not want to buy medical insurance.

Hence, the assumed $150 point-of-use price should be reasonable, but with blood draw might have to be higher to cover imbedded costs of the USA clinic system.

thanks for comments,
N