To: Laurens who wrote (715 ) 7/13/1999 1:42:00 PM From: Cheeseburger Respond to
This is my analysis and mine alone. Projections for biotech sector are often not much better than a dice roll and I have been wrong more often than right in the past. That all said, here is my best shot. In '98 Lipo sold 73.5 million of Abelcet and lost a total of just under 5 million for the year. Without the expensive Evacet phase 3 trials (which I estimated cost an ave. of 1.5-2 million/quarter or 7 million for the year), Lipo probably could have run a small profit for '98. Now I estmate that Lipo can grow sales at 15% this year and 12%/year in '00 and '01. (Note: they grew sales at 20% in 1Q'99). The gross margins on the INCREMENTAL abelcet sales for '99 should run approx. 85-90%. Let's always be conservative and apply an 80% gross margin to a very conservative 10 million in incremental abelcet sales for '99 yields 8 million in GROSS profits on sales. The same analysis yields a conservative increase of 8-10 million in gross profits/year in '00 and '01. Now Lipo will have additional expenses in the 2nd half of '99, '00 and '01. There will be additional SG&A associated with the anticipated Evacet launch. How much? If I assume a doubling of the approx. 40 sales staff at $200,000/individual (includes salary, bonus, expense allow.,and the pro-rata share of Evacet marketing expense) I come to an additional 8 million/year. Coincidentally, that expense is exactly covered by the above estimated increase in gross profits for '99. There will also be additional R&D expense associated with the hopeful phase 2 trial work for ELL-12, the preclinical work for Bromotaxol, and the expanded trial work for Evacet (other cancer trials, combo trials with taxol,taxotere, and herceptin, etc.) These extra R&D expenses should be completely covered by the incremental gross profits of Abelcet sales in '00 and '01. As you can see, I've structured a break even model for the next 2 1/2 years based exclusively on incremental Abelcet sales. This allows me to take Gross Profits of future Evacet sales right to the bottom line.
