Let't put ourselves into JNJ's shoes and see what is going on.
Now we have to talk dirty as it is about money.
At the current rate, JNJ is paying around $50m a year for pramlintide development to AMLN. By the original schedule, file in 2000 and get to the market in 2001, JNJ had had to pay AMLN an additional $150m minimal. Plus the $165m they already paid, we have a little over $300m cost before the profit coming in. It they had wanted to get the money back within five years from the time the drug hit the market, they have to have $60m net profit per year. If pramlintide can have a 33% profit margin, for $60m profit you have to have about $200m sales for JNJ's half, and that would be a $400m total sales for pramlintide.
So, JNJ either does not see a $400m drug or they didn't expected the $300m plus cost at the start of the deal with AMLN. My numbers can be all wrong as I don't have a marketing dept. as JNJ has, but they do serve the prupose.
But things are different for AMLN now as they have the whole pramlintide to themselves again. A 33% profit margin would have given them $100m profit if it can sell even for $300m a year. But, the question now is where can they find the money to finish the development.
In my view, they either have to wait for new data by Dec. to convince someone else the drug can be one have a bigger potential than $400m a year drug or sell the whole company now. Even if they sell the whole company now, we will get more the $10 a share as a $300m drug will be very easy to shop around to get a buyer. Let's hope the management has the confidence that the Dec. data will be good so the shareholders will have better returns than selling the company now.
D.Right |
