Revised Valuation Model ijfrankel
(51/M/St. Louis, Mo) 2/6/02 7:42 pm
After taking a look at P/S ratios I used them, together with a present value analysis with risk adjustments for the risks of approval for the products that are not yet FDA approved. Eg. - a risk discount of 25% means that there is only a 25% chance of the product realizing the potential.
Assumptions:
1. Present values calculated using a 25% discount rate, for 3 years and 5 months to 6/30/05 resulting in a factor of 46.7%.
2. A P/S ratio of 12 is used for Xopenex, Formoterol, Zopiclone and S-Oxibutytin. A lower factor of 8 is used for Soltara sales to account for significant marketing expenses.
3. Royalty income is accorded a multiple of 15.
4. Cash is added to the value of the company and debt is deducted.
5. An additional charge to the value of the company of $250 million is deducted to account for heavy startup costs associated with Soltara.
6. Xopenex nebulizer - sales 2002 est $150 million.
7. Xopenex MDI - 2005 sales $270 million, PV discount 46.7%, risk factor 50%.
8. t nainex 2005 Sales $1 billion, PV discount 46.7%, royalty rate 7%.
9. Allegra - US 2005 sales $2 billion, royalty 2%.
10. Allegra - XUS 2005 sales $200 million, royalty rate 8%.
11. Soltara $600 million in sales in 2005, PV discount 46.7% and risk discount of 70%.
12. Formoterol $250 million in sales in 2005, PV discount 46.7% and risk discount of 50%.
13. Zyrtec $100 in sales in 2005, PV discount 46.7%.
14. Zopiclone $300 million in 2005, PV discount 46.7%, risk discount 50%.
15. Cash $904 million, debt $1,259,000,000, Soltara launch costs $250 million and shares outstanding 77,900,000.
16. No value was accorded any other products in the pipeline.
With these assumptions the present value is $86.67.
Frankly, I think SEPR is worth considerably more. The primary argument I would make for that proposition is that once we introduce a risk factor, as I have done, that a lower discount rate should be used.
I continue to believe the bull case for SEPR - admittedly the market is acting badly and may get worse before recovering.
ij |
