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Biotech / Medical : QDEL - Quidel more quick diagnosis
QDEL 20.99-1.3%Nov 19 3:59 PM EST
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To: steve dietrich who wrote (885)6/18/1997 6:57:00 AM
From: Mike Relyea   of 1693
 
Here's my "quick and dirty" analysis on the possible future impact of the BD suit settlement. I've made many assumptions because we just don't have all the settlement details. The analysis loosely uses data from the 2 April 1997 Cleary Gull research report by Jeffery Holmes on Quidel. For simplicity, I've heavily rounded:

Quidel stated the settlement included a cash payment and royalty payments. We don't know the split. Assuming all the $1.9M annual expense is attributed to Quidel's current FY sales of $40M, then the royalty payment would be five percent ($1.9/$40). My guess is that it's much less.

In FY01 Jeffery forecast Quidel's sales to be $81M, of which $19M will be H. pylori. The suit does not include Quidel's H. pylori test. So, if we use a five percent royalty for $72M of sales ($81 - $19), then the BD suit royalty expense will be $3.6M in FY01.

Assume a profit margin of 50 percent, then Quidel's profit in FY01 will be $40M ($81 X 50 percent).

Assume Quidel's fixed expense will be $20M plus the additional $3.6M BD suit royalty expense, then the total expense will be $23.6M.

Quidel's FY01 EPS would be $0.68 ($40 - $23.6M)/24M Shares).

$0.68 X 30P/E = $20

Not bad for a stock selling for $4 today, and my guess is the impact of the royalty expense will be much less than my "quick and dirty" analysis suggests.

And remember, Jeffrey forecast earnings to increase at 40 percent per annum over the next five years. So, a 40P/E is not unrealistic.

Mike
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