Replies to post #76848 on Biotech Values

[DewDiligence]

What's Lilly's share of US [Erbitux] revenue?

That’s the wrong question—the question you want to be asking is what proportion of Erbitux’s US profits belong to LLY.

The answer: approximately 60%; this number is sky-high because LLY earns a very large royalty on US Erbitux sales and BMY does almost all of the marketing.

The US economics of Erbitux for LLY are so favorable from a margin standpoint that Erbitux is worth as much to LLY’s bottom line as a hypothetical wholly-owned drug with the same US sales as Erbitux and a typical profit margin for a biopharmaceutical. Thus, from a valuation standpoint, Erbitux can be treated as though it were wholly owned by LLY.

Annualized US sales of Erbitux are currently about $650M.