Joseph:
MGI Pharma is a real company with real scientists, real-world issues and real budgets. I guarantee that their budgets don't predict sales that have any resemblance to those that would derive from the markets that you described.
Pilocarpine isn't candy and regulatory agencies and physicians won't treat it as such.
OK, let's use the 1/1250 number (I haven't checked it in detail, but it sounds about correct) for primary Sjogren's, and let's assume that 30% of patients will benefit from using the drug (consistent with published data indicating 30-50%). Using your population numbers (it must be nice to live in Canada!), that's 33K patients in the U.S. and Canada that will feel that they benefit from long-term use.
Using these projections for primary Sjogren's, that's a sales potential of $33 million and approximately $30 million above cost. Assume that SG&A will need to triple (from $2 million/quarter) to address the market. That's an additional $4 million/quarter or $16 million annualized, leaving $14 million or about $1/share *profit* (I'll assume that, by tripling the SG&A, I've compensated for the Pharmacia and Upjohn money that leaks away in Canada). Take away last quarter's loss, annualized, and you've got $10.7 million/year.
These are severe (but in my mind rational) restrictions on a projected market size and profit. They deal only with primary Sjogren's. Also, given that Salagen sales for existing indications are increasing at a healthy clip, that INFed is firing up, and that the company has plenty of cash to weather a period of market penetration for Sjogren's, it's pretty severe to subtract the 4X last quarter's loss.
Given growing sales of existing products and plenty of cash in the bank, it seems that a PE of 30 is reasonable. That $10.7 million would therefore give you a share price of $23, full penetration.
It's obvious that Blitzer is running an interesting ship. Looks like these guys/gals are movers-shakers that will continue to in-licence stuff to keep the sales force busy, and that they have the track record to convince potential partners.
Note that I haven't mentioned MGI 114, acylfulvenes in general, NCI funded trials or anything relating to a market premium that is generally assigned to biotechs and their pipelines. One could argue that these factors support the PE of 30. O.K. Nonetheless, I'd say that Richard's enthusiasm about launching phase II studies are justified.
It's nice to see a company that has taken advantage of the Orphan Drug law for its intended purpose. No-brainer.
I haven't checked...... is Chiron still the partner for European distribution of Salagen? Chiron recently bowed out of a distribution agreement with DepoTech, and I got the feeling that they might be retrenching in Europe???
Cheers! Rick |
