Replies to post #37517 on Biotech Values

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Heads in the sand?
Apologies to Dew on 2 counts. Being new to this venue I did not realize that I had posted to the biotech values board. I thought the post had disappeared. Secondly, Upon further review I found that I overstated the inventory expense in the last year.

I invite all GTCB holders to test these hypotheses.

LEO negotiated a deal with GTCB with a transfer price provision that GTCB did not fully understand at he time. Or, To get CHMP to approve ATryn, GTCB had to drastically alter the method of production or quality control thereby making the transfer price untenable.

Due to Zebra's law GTCB had to move ahead with the progam. There is still the U.S., the rest of the world, the knowledge to be gained from the Phase II trial and other acquired indications.

I find it difficult to accept the assumption that had that CHMP letter been favorable we would have needed massive ATryn inventory to support a launch. We would still have to transfer the rights to LEO and wait months in every European country for reimbursement issues to be resolved. The HD indication is small. The company unofficially guesses the HD indication will yield 25 mil in revenue to LEO in the 12 months AFTER transfer and AFTER every country settles reimbursement issues.

After the CHMP decision to not approve the March 10K take on the LEO transfer price follows:

"LEO will pay us a royalty on all commercial sales, as well as a transfer price that we believe will provide us a margin on our cost of production. LEO will pay us at cost for all product used in clinical studies"

In the last qtr of 05 after a selling price analysis we wrote down 1 mil in ATryn inventory leaving us with 1.3 mil in inventory per the balance sheet.

In the 1st qtr of 06 we manufactured 3.3 mil and wrote down 1.2 mil but only showed an ending inventory of .9 mil.

In the second qtr we wrote off 1.2 milfor the first time labelling it as "in excess of max selling price to LEO". We ended the quarter with .6 mil.

In the 3rd qtr of 06 we wrote off 3.7 mil for the same reason. We ended the quarter with .8 mil per the balance sheet. At that point alarms sounded in my head. Where did it come from? How is it valued?

Respectfully,

Dave

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