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Biotech / Medical : Sepracor-Looks very promising
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To: Bob Swift who wrote (3051)5/27/1999 12:25:00 PM
From: Bob Swift  Read Replies (3) of 10280
 
Did a little research on the earnings of some generic companies.

Watson
Sale Net income % profit (sales in millions)
556 121 22% (1998)
324 91 28% (1997)
224 62 28% (1996)

Mylan
528 101 19%
440 63 14%
392 102 26%

BRL
307 36 12%
257 27 11%

Chattem
220 18 8%
143 73 51%
118 38 32%

IVX
637 71 11%

Average out the Net profit is 20%. 25% if one were to exclude IVX and BRL which has their own peculiar twist to their earnings.The gross margin is in fact quite high. My impression is that the margin are eaten up by running the company and so, the more in the pipeline the more to the bottomline.

Now, if all of SEPR's ICE were to be sold at generic price, the breakdown is as follows:-
Parent 1998 sale(millions)
Prevacide 1800
Claritin 2300
Prozac 2800
Ventolin 1400
Propulsid 1000
Himanal 600
Ditropan 130
Foradil 140
Cardura 600
Zyrtec 550
Meridia 1000
Orudis 200
Effexor 200
Zyban 500
Imovane 144
Pantozol 500
Zofran 600
Sporanox 550
Norvasc 300
Serevent 300
Total 15614

Assuming the generic sells at 1/7 of the parent price i.e. 15%
Sale 2342
Since the pipeline is rich, the expenses should eat up less of the margin and I assign a 25% margin (similar to Watson)
Net income 586
Earning per share $14.6

This is not to say none of these 20 drugs will command a premium price as the parental drug as we already have data on some. This will of course add to the $ 14.6 per share.
I have not consider the timiing of the introduction of these ICE. Also the assumption of 15% pricing is just a guess.Could be more or less depending on if competitors got scare away or not.
As of now, if SEPR is not at the bottom, it is very close and anyone selling should have their heads examined (big and little).
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