Replies to post #102815 on Biotech Values

[10nisman]

MNTA

Without taking into consideration filling the pipeline, if the run rate is in the range of < $100mil/quarter there will be a huge disappointment come earnings time.

Huge disappointment? Playing your short hand again I see. Why don't you just cover like Wallstarb?

If Sandoz took 50% of a non-discounted U.S. market ($2.7 billion), MNTA would net approximately $120-125 million a quarter or $480-500 million. Throw in a discounted market and MNTA is likely to have a quarterly run-rate between $70-120 million once Sandoz grabs its full market share (40-60%).

Taking the mid-point MNTA would generate $95 million a quarter or $380 million per year. That run-rate would result in generating approximately $320 million in annual pre-tax free cash flow after payment of all expenses. On an after tax basis, MNTA would generate approximately $200 million in annual free cash flow or annual EPS of approximately $4.00/share.

The market is currently valuing MNTA at approximately $800 million ($750 million on a net cash basis and $650 million on a net cash and NOL basis) or about 2.1x estimated annual Lovenox revenue and 4x estimated annual after-tax Lovenox EPS and free cash flow. Assuming a 10x annual after-tax Lovenox EPS and free cash flow is deserving, the current MNTA market price is expecting a quarterly run-rate of approximately $45-50 million. If you attribute some value to M356, M118, etc. ($3-6/per share), the market is pricing in a quarterly run-rate of generic Lovenox sales of $35-40 million.

....lack of analyst support.

Lack of analyst support? What are you talking about? What are you expecting analysts to do - reiterate their outperform and buy recommendations every other week?

BTW JBOG, thank you for your kind messages earlier. I hope you start feeling better soon. Hopefully, you've realized its better to accept your short comings than be resentful towards those with a PhD.

GL,
10nis

[zipjet]

If we take notice of Eyeambills post regarding HeathTrusts Lovenox's agreement and RegularDoc's post regarding Sanofi's pricing for VHA contracts (priced lower than Sandoz).

Now add to those comments Sandoz's court filing estimating a sales projection of >$40 mill over the next 6 weeks.

Those are good data points. But you carefully elided several others that help complete the puzzle. Sandoz, at launch, could only supply 35%-40% of the market. Sandoz shipped 5m units before the "next six weeks". Shea indicated in the BAC presentation that they had fully penetrated the market, which I took to mean they were selling out their entire production.

I might start to think that they don't teach the Duopoly theory in France's higher education system.

SNY needs to cut deals to maintain market share. I would expect them to meet Sandoz pricing for similar volume contracts. This type of tactical contracting is consistent with my views on duopoly pricing.

IF a price war starts neither competitor will maximize duopoly profits. It is silly for SNY to start a price war with a capacity constrained competitor. It is silly for Sandoz to try and take 90% of the unit market.

Will rational* behavior prevail?

My guess is yes.

zip

* Keep in mind that there could be other factors which I am missing that would make a "scorched earth" pricing strategy by SNY rational. Eg. If Sandoz or MNTA had another pipeline product that was aimed at SNY.

[EyeamBill]

MNTA GPO Pricing and P/E Estimate

I echo some, if not all, of Zip's reply. I used the $15-$20 mil quarterly earnings posted elsewhere, which I took to mean EBITDA, and applied a non-accountant's crude estimates of taxes and so forth. I then applied a P/E multiple for the annualized earnings. I came up with about $17.50 for a multiple of 20. You can go from there to determine what a P/E of 30 or 40 might mean.

Is there somebody out there with more accountancy skills than mine who can perform a more solid estimate than this?

I'm a hospital pharmacist and I'm not involved in any GPO negotiations with Sandoz or any other vendor; I'm only a recipient on the e-mail address list for the GPO (HPG in this case). So, I'm in an entirely different layer of the onion than the negotiators.

Now that the disclaimers are out of the way, I offer the early sales of m-enox as compared to something with which we're all more familiar: Automobiles.

For the the 1st-quarter post-approval most sales are going to be Sandoz selling to wholesalers in anticipation of demand, much in the same way GM might sell cars to dealers. So, I don't think the 1Q post-approval will have disappointing sales. The 2Q post-approval will reflect demand from hospitals primarily much in the same way that consumers ultimately drive automobile demand. So, the onus will be on Sandoz to provide better pricing to the GPOs by then, IMHO.

Thanks for reading and posting.

Bill

[ilpapa]

It may be totally daft on Sanofi's part, but it seems to me that an SNY scorched earth policy (to borrow Zipjet's phrase) has some explanatory value for the price action. It's simple, and I'm a fan of William of Occam.