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Biotech / Medical : Sepracor-Looks very promising -- Ignore unavailable to you. Want to Upgrade?

To: IRWIN JAMES FRANKEL who wrote (3799)	10/22/1999 3:31:00 PM
From: David Howe	Read Replies (1) \| Respond to of 10280

I see SEPR's burn rate at around $45 - $50 million once Xopenex ramps up (even if it ramps up very slowly). Also, don't forget about the following one time payments and royalties: Lilly will pay SEPR as much as $90 million in one time payments (once the FTC gets out of their way). Allegra xUS back royalty should add another $5 - 8 million. Allegra royalties (xUS only) should add $8 million per year minimum. Claritin + royalties should start in late 2000 or early 2001 should add about $20 million per year at first ramping up to $100 million. Prozac + royalties should start in late 2001 and could add up to $140 million per year. Also, the following only accounts for one time payments on Prozac and Allegra and royalties from Allegra, Claritin and Prozac. Any other deals made for new products would be a bonus. Any additional products that begin generating earnings would also be a bonus. Here's a very quick look at the situation, quarter by quarter until things turn positive in mid 2002. Xopenex sales are factored into the burn rate (ie. - $51 million per quarter, similar to this quarter, but with some improvement in sales). Other payments and royalties are called out in the equations. Comment as you guys see fit. Cash at the end of Q4 1999 = $378 - $51 + $8 (back Allegra royalties ) = $335 million Cash at the end of Q1 2000 = $335 - $50 + $2 (Allegra royalty) = $287 mm Cash at the end of Q2 2000 = $287 - $50 + $2 (Allegra) + $20 (1st Prozac payment) = $259 mm Cash at the end of Q3 2000 = $259 - $49 + $3 (Allegra) + $20 (2nd Prozac payment) = $233 mm Cash at the end of Q4 2000 = $233 - $46 + $3 (Allegra) + $20 (3rd Prozac payment) = $210 mm Cash at the end of Q1 2001 = $210 - $46 + $4 (Allegra) + $3 (Claritin) + $20 (4th Prozac payment) = $190 mm Cash at the end of Q2 2001 = $190 - $45 + $5 (Allegra) + $8 (Claritin) + $10 (final Prozac payment) = $168 mm Cash at the end of Q3 2001 = $168 - $45 + $6 (Allegra) + $15 (Claritin) = $144 mm Cash at the end of Q4 2001 = $144 - $45 + $6 (Allegra) + $20 (Claritin) + $5 (Prozac Royalty) = $130 mm Cash at the end of Q1 2002 = $130 - $45 + $6 (Allegra) + $25 (Claritin) + $10 (Prozac) = $126 mm Cash at the end of Q2 2002 = $126 - $45 + $6 (Allegra) + $25 (Claritin) + $15 (Prozac) = $127 mm Cash at the end of Q3 2002 = $127 - $45 + $6 (Allegra) + $25 (Claritin) + $20 (Prozac) = $133 mm Cash at the end of Q4 2002 = $133 - $42 + $10 (Allegra w/ US) + $25 (Claritin) + $30 (Prozac) + $5 (Zyrtec) + $2 (Oxy) + $2 (Formo) + $2 (zopiclone) = $167 million In this scenario, SEPR never gets below $127 million in cash and they roll into 2003 with a full head of steam and abundant profits. If the FTC blocks the Prozac deal (pretty far fetched) or something else halts the payments, SEPR may have to back off on R&D. If this happened, they could drop the burn rate to $35 million per quarter. Or, they could continue at the current burn rate and get down to around $40 million in cash before things turn positive. FWIW, this is a quick look of the situation through the eyes of a bull. I believe it's in the ball park, considering the 10 minutes spent thinking about it. I'm sure SEPR has put a lot more thought into it than that. Dave