jeffery,
My personal feeling regarding SEPR's valuation is that while it's fun to look at forecasts for specific products, and that it might give some idea of SEPR's potential, no model can give adequate weight to the uncertainties of product development, or to the potential for positive surprises, new developments, etc. But if you assume that the market success of Allegra and the regulatory success of Xopenex validates SEPR's basic approach, you have to figure that a goodly portion of SEPR's 20-25 candidates will eventually make it to market. So when the company has matured it should have at least the number of product offerings of a Forest Labs, a Mylan, a Watson, all of which have market caps twice to half again as large as SEPR. That would be my off-the-cuff answer to Bob's questions about the worst-case scenario: several smaller products come to market, but no blockbusters.
If one of the drugs becomes a blockbuster (Norcisapride? DCL? R-fluoxetine?), take a look at Immunex, with its $10 billion market cap, to see what that could be worth. Yes, I agree with you that today's market might not be tomorrow's market, but can you tell me whether it will be stronger, or weaker?
As you probably know, SEPR's ICEs are developed using two distinct technolgies, one chiral, the other active metabolite. So far, it seems like the latter is most likely to yield a blockbuster drug, for the simple reason that it is by means of this technology that severe adverse reactions to the original drug have been successfully removed, while retaining all therapeutic benefit. Then the parent drug can be taken off the market, leaving the entire market share to the SEPR ICE. This has already happened with Seldane/Allegra. It is likely to happen with Norcisapride, which has the added attractions of having further indications that could broaden its reach considerably, as well as not having much competition.
The chiral technique up to now has not provided any such dramatic benefit over the parent compound, though there are hints that the SEPR ICEs will offer some more limited positive points of comparison, versus the original. In these cases, the hope for a blockbuster comes from marketing savvy and brand equity, and includes marketing deals with the originator. Examples are SEPR's versions of Prozac and Claritin.
I think the most compelling argument to buy SEPR is made by looking at long-term (15 year) charts of biotechs and generics that have made the grade (AMGN, BGEN, FRX, BVF, WAT). I have an old ValueLine lying around the house that I like to consult at times like this. Believe me, it has proven to be far more valuable lately than it was ten years ago.
One final note, SEPR is in the final stage of textbook classic correction in a growth stock: down >50% on no news (ie nothing that changes the story fundamentally) after a prolonged uptrend.
|
