Given the reality of the current situation and the past year, I would say that your estimate is perfectly reasonable.
Note, however, that if the current growth rate of AGPH is sustainable for at least a few years, then a much higher multiple is justified. For example, take Microsoft - it goes at a P/E of 51 and at a P/S of 14. How much bigger can MSFT get? Note also that the P/S of AGPH, based on 4x the past quarter, is only about 3. I believe that AGPH has far more growth potential than MSFT and, therefore should command much higher multiples.
Last fall, old news regarding Viracept resistance and AGPH competition was blown way out of proportion, causing the stock to tank. Since then, it has become clear that no new resistance issues have emerged and no new viable competition is on the horizon. In fact, the rollout date for VRTX's product is sliding out to the right and it is becoming apparent that VRTX has no improvements to offer to the PI market. I'll also add that mgt. never expected Thymitaq to be a great product and it's loss is of minor consequence. In summary, the valuation risk factors assigned to AGPH have greatly diminished with time. This, combined with the huge short interest, is building up a huge watershed. The longer this goes unrecognized, the more dramatic it will be when the short interest is covered.
If AGPH continues to manage as it has in the past, i.e. overpromise and underdeliver, it will soon command an even greater multiple than MSFT does today. It is entirely possible that in 10-15 years, AGPH will be a pharma giant. |
