ZONA:
I am trying to portray a best case scenario for ZONA. I read recently that Viagra sales have dropped off to an annual world-wide run rate of slightly less than $500M. I believe that Shearing Plough will give ZONA royalties of I believe 20% of sales.
I will assume that the FDA approves Vasomax which in itself is a big assumption.
Assume that over the next three years, ZONA gets market share of 20%, 30% and 40%. I actually would expect market share to go down as additional products come to market and Viagra fights the competition but I am painting a best case scenario.
Using the above, the sales of Vasomax would approximate $100M, 1$150M and $200M with royalties of $20M, $30M, and $40M.
Lets further assume that 20% of these royalties drop to ZONA's bottom line yielding profits of $4M, $6M and $8M.
With 11 million shares outstanding, that will translate to an EPS of $0.36, $0.55 and $0.73 and a PE ratio of 75, 49 and 37.
Now I know from experience that whenever one piles assumptions on top of assumptions on top of assumptions, there is little chance of one coming out with the correct conclusion. Nonetheless, one must make decisions based on their interpretation of whatever existing data exists and make assumptions on all the rest.
My conclusion is that even if Vasomax is approved, a lot of high expectations have already been built into the price.
Maybe not the best short in the world but IMO, not the best long in the world either.
I would appreciate thoughtful comments on my analysis as I am only too interested in gaining as much insight as possible.
Bob T…. Still Short
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