total viracept scripts = 5,197 for the week ended 6/13 - down 3.5% from previous week. Both new prescriptions and refills were down. New prescriptions were off 10% to 2,710 from 3,013. Crix prescriptions were up. There is also a controversy brewing in that in some patients who have switched from Crix to Viracept problems are starting - serious problems - the virus is becoming resistant to Viracept more quickly than in patients who don't switch. In looking at determining "fair value" for AGPH or any other hypothetical firm relying on an HIV drug, none of the sell side analysts recommending the stock have basic financial analysis on their side. Rationale - HIV drugs are not drugs to take for 10 or 15 years. Based on current science, these drugs have a lifetime in the marketplace of maybe 4 years. At that point: 1.better drugs will displace them
2. mutations have rendered the drug pretty ineffective.
For example, AZT - it's fading. Even 3TC will only be around for maybe 3-4 years. Given that, the P/E multiple that should be applied towards any earnings from that type of a growth scenario is quite low. There is a steel fabricator going public later this week that is growing eps pretty steadily at roughly 15%, and they will be selling steel 10 and 20 years from now. The P/E it's coming public at is roughly 8x cal. '98 eps. Its eps will grow 21% from '98 to '99. Sounds pretty good to me. In any INTRODUCTORY finance class in business school, you learn that the present value and current multiple on an earnings stream is dependent on the following factors: current earnings, earnings growth rate, discount rate, risk-free interest rate (treasuries), volatility of the earnings stream, and however far out you want to go in projecting. With an AIDS drug, you cannot go out very far in the future, the volatility of the earnings stream may be very high due to new product introductions even during the brief lifetime of an AIDS drug. The most important item of the 2 is the first. given all that, if I even allow myself to say that the projected numbers for AGPH by the sell side deal-sluts (sorry, I meant analysts), the P/E the people say the eps stream deserves would get a failing grade in even a community college finance class. In FY 99, Viracept likely peaks, If they earned $5.00, what P/E should the world put on that? Since the numbers go down from there, maybe 10-12x, which gives you $50-60 and then you have to assume that the pipeline is working. In addition, that $5.00 assummes only 18 million shares outstanding. |
