Globe trashed QLT in its Vox column on page B15 this morning. I couldn't find much in the way of accurate statements therein.
I left a voice message with Tamara and spoke with Karen P.
Tamara will probably talk to the Globe.
I sent a short little love note off to the Globe myself.
It follows.
Ian.
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I expected better from the Globe. I should have known better.
The column contained so many inaccuracies and misleading statements, one doesn't know where to start.
Let's take the statement about Visudyne Sales being up 22% up from the year earlier Quarter. Visudyne wasn't an approved drug 1 year ago and had no sales in the year earlier Quarter. The first Quarter with Visudyne sales was in the Quarter ending June, 99. And the September Quarter was up more than 22% than that one.
The rest of the numbers are just utter nonsense. In QLT's earnings reports, it reports its revenues and earnings. Period. It doesn't report Novartis's revenues. It's reported revenues should not be reduced to account for
Novartis's share. That share never ever made it to QLT's report, and never will.
And the nonsense about 365 times trailing earnings: Duhhh! The company just reported its first Q of profitability (operating earnings from which P/Es would be calculated). While I doubt this number is any more accurate than any other in the column, it's irrelevant.
And the Leerink Swann spot poll has already been discredited. Yes, Visudyne sales were slow during the early summer months. The company reported very strong sales during September which have continued into October.
Then there's the sheer stupidity of calling the market for Visudyne $600M US. QLT's share of Visudyne revenues will be $600M US in 2003 by the company's current estimates. Other analysts such as Deutsche Bank Alex Brown and CIBC World Markets have higher estimates than that. ING Barings tops the list at $671M for 2003.
None of these estimates include any revenues for the expanded label application with the FDA and European authorities. None of them include any revenues likely
to result from other clinical trials underway now. Upside to the $600M is in the order of another $400M-$500M by 2003.
It's nearly impossible to know what profit margins will be in 3 years but they can be expected to improve as unit manufacturing costs go down; and the initial hump in marketing costs begins to abate; and, the cost of all the clinical trials disappears.
Revenues will be a multiple of those estimated in the column much sooner than 2003. By next Q, we can expect close to $50M or a $200M run rate. Profits will be much stronger than indicated in today's column. And its a major disservice to the Globe's readers to compare the P/E of an emerging biotech which has just reported its first quarter of profitability with the average P/E of the S&P.
The growth rates of the two are just not at all comparable.
And I can't believe that any writer for the Globe wouldn't understand how misleading this column is. And I find it difficult to believe that any ethical editor would allow this trash to be published.
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And here's the piece of trash that provoked my response.
archives.theglobeandmail.com
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VOX
Compiled by Fabrice Taylor
Wednesday, October 18, 2000
Don't wear blinders when you size up QLT
Besides making a treatment for blindness, QLT should make a drug that lets
investors see through the smoke in its earnings statements. The company, whose
great promise is Visudyne, a drug used to treat macular degeneration, reported
earnings of $4.3-million or 6 cents a share, and said Visudyne sales rose to
$45-million in the third quarter. Looks good, but wait: QLT made $7.3-million
from investments, without which it would have lost $3-million. And while
Visudyne's sales growth -- up 22 per cent from the year-earlier quarter -- was
impressive, QLT's share of the bounty was only about $11.5-million (U.S.), the
rest going to partner Novartis. So where does that leave QLT shares? Trading at
120 times sales and about 365 times trailing earnings. Seems steep, but what
about the future? Visudyne is obviously catching on with doctors. QLT estimates
the potential market for the drug at $600-million (U.S.) by 2003 (probably a
generous forecast). But a recent survey of retina specialists suggests that 40 per
cent fewer patients would be candidates than first thought. So let's assume a
market of $480-million. If QLT gets half that, it is currently trading at 16.4 times
these future sales. The S&P drug subindex averages nine times. Now give QLT a
30-per-cent profit margin on Visudyne. That gives its shares a P/E of 80 at
today's price, compared with an average P/E of 35 on the S&P. You don't need
drugs to see where this is going . . . |
