Replies to post #111456 on Biotech Values

[DewDiligence]

zipjet: You forgot to divide by 2 to account for NVS’ 50% share of the NVS/MNTA Copaxone collaboration. Regards, Dew

[zipjet]

Revised to correct for error (Thanks DD) of not reducing PV to the MNTA level:

The analysts say that their "base case" of limited US generic competition in 2014 give Copaxone's contribution a net present value of $14 per share; a generic rival in 2011 could result in $5 of downside risk; and if there is no generic competition until 2020, this could result in a $11 net present value upside potential.

That gives an interesting indication of the value these analysts attribute to Copaxone. TEVA has about 0.9B shares.

The "limited [one generic by MNTA/Sandoz, my interpretation] US generic competition in 2014 case. Copaxone is worth $12.6B to TEVA. That drops to $8.1B if in mC is approved in 2011.

The statement is not clear but to be conservative assume that ONLY US generic sales are at risk and mC is the generic.

Thus, the PV difference in $12.6B and 8.1B of $4.5B (0.9B*$5) is attributable to just 3 years of mC for both MNTA/Sandoz.

That represents about $40 per MNTA (45% to MNTA) share**. Again that is just for 3 years PV.

I would argue that the market for C in duopoly should split 50:50 by revenue. If the entire c-market PV is $25 (14+11) per TEVA share the value of that is $22.5B. Assume further that the US represents 70%* of worldwide C sales and that mC is brought to market at a 15% discount. Thus, the PV of a 2011 approval on $22.5B becomes $13.3B for the US (to be split equally between TEVA and MNTA/Sandoz) or about $60 MNTA ps (at 45%).

That would make for a Merry next year. Ho ho ho.

MNTA has a $700M MC - tiny by comparison.

BTW - feel free to correct the assumptions, logic, math or whatever I screwed up. Those calculations look preposterous (had to beat DD to the punch). I did this quickly after reading the post.

Note: DD suggests that we should use 60M shares for MNTA rather than 50M. I do not disagree but since I am only interested in getting in the ball park I will leave it at 50M. The point of the exercise is that mC is worth multiples of the current MC of MNTA IF the ML analysts have this right.

ij


* No doubt someone can tell us what that really is - I am guessing.

** Using 50M shares for ease.