Biotech Valuation Message Board

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Biotech / Medical : Biotech Valuation

CRSP 56.87

-2.3%

Dec 5 9:30 AM EST

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To: rkrw who wrote (9628)	12/2/2003 9:54:54 AM
From: Icebrg	Read Replies (2) of 52153

>>Too scattered for my taste too>> There is almost no scatter left at this time. Apart from Cialis, Icos has not been very "lucky" in their drug development efforts. The following sketchy valuation approach was posted over at Yahoo more or less confirming the market's current opinion of Icos. Maybe it is somewhat optimistic. LillyIcos doesn't get all the Cialis revenue. Some of the sales are done by Lilly who will then pay a 20 % royalty to LillyIcos. And the multiple of 8 is maybe on the high side, in a situation when Cialis has already reached total sales of 2 billion dollars. And as things stand today, it is too early to hope that the pipeline will provide anything substantial. And coming back to where this started. The arguments for shorting Icos at today's share price are not very convincing (if there are any at all). Erik 1. The current price is based on sales of about 600 to 800 million in 2004. Of this amount, ICOS gets approximately half, which accounts for 300 to 400 million for the year. Based on the valuations of the biotechs and the pharmaceutical industry, this would leave a valuation of 8 x (300 to 400 million), which would leave a market capitalization of about 2.4 to 3.2 billion. This is the range that we have been in for the last three months. 2. Two issues can be raised on whether or not the 700 million dollar estimate in annual revenue for ICOS/Lilly is too conservative. First, it seems that this number is based on the idea that ICOS will get about thirty to thirty five percent of the market share for ED products. This estimate is currently built in to the stock -- i.e. .35 x ( 2 billion) = 700 --> which generates 350 million for ICOS. Now suppose that ICOS starts to really capture market share from PFE's viagra. Let's suppose that it captures 50 percent of the market share of a two billion market. This would lead to 1 billion dollars of revenue for ICOS/Lilly, and 500 million for ICOS alone. Based on an this scenerio, ICOS would command a market capitalization of 4 billion if we were to compare it to other biotechs such as Melenium pharmaceuticals (look this up as MLNM). This would entail of a price of about $60 - $65 dollars within the next year if ICOS captures 50 percent of the market for ED drugs.

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