Chromatics Color Sciences International. Inc; CCSI Message Board

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Biotech / Medical : Chromatics Color Sciences International. Inc; CCSI

CCSI 24.13

-2.0%

3:59 PM EST

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To: M. Frank Greiffenstein who wrote (1576)	3/25/1998 9:55:00 PM
From: GemSeeker	Read Replies (2) of 5736

Found the following post on Yahoo CCSI thread. It was posted in response to an excellent analysis from Skipard. Anyone on this thread have any actual knowledge of royalty rates in this area? <<<<Someone's model said this: ++++++++++++++++ YEAR 1....Assume a deal is in place giving CCSI a minimum of 25% annually. 1st year market penetration of 10%= $100mm x 25% = $25,000,000 in revenues to CCSI. Assume 80% pre-tax margins= $20,000,000mm/ 8.5mm shares= $2.35 pre-tax, but with a substantial tax loss carry forward a lot of this will be sheltered. Assume a market multiple of 30xp/e=$70 price target on pre-tax numbers. ++++++++++++++++ The problem is the first line. "Assume a deal is in place giving CCSI a minimum of 25% annually." That's an outrageous royalty rate. With CCSI's patent position,something like 0.25% would be more reasonable. Even if CCSI had the patents really covered, a typical royalty rate in the diagnostic business would be more like 2.5%. Note that if you assume a more reasonable (and very generous) royalty rate of 2.5%, the target stock price is more like $7. CCSI is way overpriced. >>>>>

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