Guilford (GLFD) - Steadily Rising Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Guilford (GLFD) - Steadily Rising

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: John Dwyer who wrote (67)	8/23/1997 4:04:00 PM
From: Vector1	of 496

Thanks for the reply John. I agree that $2 billion in 5 years is unrealistic. I was using an extreme example to illustrate the economics of the deal. GLFD is basically an R& D and clinical trial shop. They have no marketing or sales expertise and creating such an infrastructure is expensive and requires much attention from senior management. In addition they have no large scale manufacturing expertise. Getting manufacturing facilities approved and dealing with all the logistical dificulties is not easy especially for a company without expertise in that area. Through the deal they are leveraging AMGN's expertise in these areas thereby assuring likely better sales penetration when approval is ultimately achieved and decreasing the risk of costly delays. The price they pay is 75-80% of the gross margin. Lets again use your numbers. $300 million in sales. Lets assume the manufacturing cost plus distribution is 30% or $90 million. Marketing and sales will be at least 50-60 million. I base this partly on BGENs ongoing infrastucture build on Avonex.. G&A will be about 10m higher rsulting in gross profit before R & D of $ 140m. Assuming R-D of about 50m and a 40% tax rate net income isabout $50 million. However because the company didn't recieve the 35m upfront cash and milestone payments they would have had to do at least one equity offering to raise cash. Lets 3million shares at $25 per. Thus assuming $22 million share the eps would be about 2.30 per share. Depending on whats left in the pipeline the multiple would range from 20-40+ resulting in a share range of 46-92+. Obviously this is not an exact science and it's a difficult call for a small biotech. It is difficult to expand what you are good at (ie drug development) into becoming a full flegged pharmacuedical. Yes they give up some upside but partnering with AMGN reduces the risk and leaves plenty of meat for investors to chew on. Enjoy your vacation and I'll be happy to continue the discussion upon your return. V1

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next