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Biotech / Medical : Guilford (GLFD) - Steadily Rising
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To: Vector1 who wrote (66)8/23/1997 3:17:00 PM
From: John Dwyer   of 496
 
Vector1,

Thanks for the thoughtful reply. What you are assuming here is
that all ten indications will go through all three phases and be
approved in 5 years. That seems almost impossible. I think that
it is reasonable to assume that maybe 2 or 3 will make it through
in five years. I figure that Amgen can't afford to run clinical
trials for ten compounds plus whatever is in their own pipeline
all at the same time. If all goes well, then maybe 1 or 2 get FDA
approval at first while others progress through the pipeline. So
then we might expect revenues five years out to be more like $60
million (revenues on a combined $300 million in sales, assuming
100% penetration during first year of sales) plus about $60 million
in milestones (1-2 drugs times $40 million average per drug). So
that's about $120 million before taxes, burn etc. Using your ratio
of before and after expenses, that means about $65 million flows
to the bottom line... about $3.5 per share... or a stock price of
70 (five years out) assuming your p/e. If the royalties are really
20%, then that's respectable but not spectacular. Feel free to
question any of this... these are just my guesstimates.

I think we just need to be realistic on how many of these indications
will actually get approval and the size of the market for
each indiaction. GLFD gave away essentially _all_ foreseeable
indications in exchange for royalties and I just don't understand
why. I would also like to understand what happens if the first
or second indication fails during the clinicals. Does Amgen bail
on the rest or keep trying?

Please comment on this... I really want to understand this deal
completely before I make a final judgement. I will be away for a
week on vacation and I will reply to any additional comments
after I get back. Good luck this week!!!!!

John
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