Replies to post #106953 on Biotech Values

[biopearl]

Zip and Dew, does this translate for those of us who are nonverbal re accounting that the Q3 MNTA numbers will not show the anticipated bottom line profit but the Q4 numbers will? TIA bp

[10nisman]

NVS’ operating margin on Lovenox is artificially high during the temporary period in which NVS is entitled to recoup its Lovenox development costs. I’m pretty sure NVS’ true operating margin on Lovenox is at least 60%, but it’s the temporary recouping of NVS’ development costs that causes your method to yield a number as high as 80%+.

Dew - Let me know if the below reasoning makes sense (seems in the ballpark)...

Per page 14 of NVS Q3 press release, Sandoz R&D Expense in Q3 2010 was 6% of net sales or $131M versus Q3 2009 R&D expense of 8.2% of net sales or $152M. The 2.2% decline was "due to the recovery of co-development expenses from an external partner as well as continued productivity savings."

Assuming the vast majority of the 2.2% R&D savings on Q3 2010 net sales (or $47.9 million) savings is due to MNTA co-development reimbursement, then it should be possible to work backwards to determine gross profit on mLovenox and potential earnings received by MNTA.

Assuming $45 million of the $47.9 million is MNTA co-development reimbursement than working backwards we should be able to determine an approximate gross profit percentage for mLovenox and potential MNTA Q3 earnings. (MNTA co-development reimbursement could be greater than the $47.9 million savings however tried to error on the conservative side).

Revenue $292M
Less COGS: (92M)
Gross Margin: $200M
45% MNTA share = $90M of which 50% is paid to Sandoz/NVS for Reimbursement of co-development expenses.

Q3 MNTA Earnings
Revenue:
mLovenox: $45M (net of co-development reimbursement)
mLov Milestone: 5M
Total Revenue: $50M
Quarterly burn: -$16M
Profit before taxes: $34M
Taxes: -$12M
NOL: $12M
Q3 net income: $34M
Q3 Fully diluted EPS (assuming 50M shares): $0.68 per share

10nis