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Biotech / Medical : Paracelsian Inc (PRLN)
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To: Jonathan Schonsheck who wrote (3707)7/13/1998 8:25:00 PM
From: John H. Farro  Read Replies (1) of 4342
 
Jonathan

I am very impressed with the figures on the 8-K. I know I was beginning to get a bit impatient for them to negotiate a deal. I was hoping for them to have a deal hammered out by the stockholders meeting. The longer I waited, the more nervous I was becoming. Fortunately, our leaders were far-sighted and didn't give in to the temptation to sign a quick and dirty deal-- a deal which would have provided much less value to the shareholders. For that we should be thankful.

It looks like we have a minimum $400,000 guaranteed income this year and $1 million seems possible. I know that at the stockholders meeting they said the burn rate was $60,000/month. I suspect that will go up due to increased marketing and other costs they will incur to fulfill the terms of the contract. I have no idea what the new burn rate will be, but perhaps $1 Million/year is not too far off. In that case they will now be at the breakeven point in a year, and if they negotiate a contract that will bring in another $1 Million a year they will have $1 Million profit. There are now approximately 15 million shares outstanding, meaning they will earn $.0667/share. If the company has a P/E ratio of 30 the stock should be worth $2 at the end of a year.

Of course, I am making a whole lot of assumptions here. The burn rate may well go over $1 Million a year, making this calculation unrealistically high. On the other hand, It assumes that Scherer will not market any of PRLN's herbal medicines as dietary supplements and that PRLN will not find anyone interested in making a deal for the Ah ImmunoAssay. It is also possible that a stock with the growth potential of PRLN could have a P/E of 50. If things fall our way, then $2/share could be an underestimate.

Robin
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