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

To: sam who wrote (1797)	2/20/1999 10:47:00 AM
From: David Howe	Read Replies (1) \| Respond to of 10280

A quick look at Sepracor's Pipeline. Sorry about the format difficulties (this isn't exactly MSFT Word). They are organized by therapeutic category. My guess on the next partnership to be announced is for (2R,4S)-intraconazole, the Sporanex ICE. You'll find that near the bottom of the list under anti-fungals. This is only a partial list (remember that SEPR has patented around 40 major selling drug ICE. The list below are the ones SEPR is serious about and is moving forward on (one exception that I know of is (S)-fluoxetine, they seem to have put that on the back burner in an effort to put (R)-fluoxetine, the Prozac ICE, on the front burner) I wonder why ;-) Dave [Sepracor Product] [Parent Drug] [Sales (mil)] [Potential Benefits] [Status] Respiratory Diseases Levalbuterol HCI Ventolin®/Proventil® $1,400 Potential for improved safety and efficacy approvable letter (R,R)-formoterol Foradil®/Atock® $140 Potential for rapid onset, longer duration Phase II (-) -cetirizine Zyrtec® $550 Potential for reduced sedation Preclinical (patent granted 5/98) Fexofenadine (Allegra®) Seldane® $400 Reduced cardiovascular side effects Launched Norastemizole Hismanal® $150 Potential for improved potency, rapid onset, longer duration, reduced cardiovascular side effects Phase III DCL Claritin® $1,700 Potential for improved potency Phase III Urological Disorders (S)-oxybutynin Ditropan® $134 Potential for reduced side effects including: dry mouth, dizziness, nausea and palpitations Phase II (S)-doxazosin Cardura® $600 Potential for reduced orthostatic hypotension and improved potency Preclinical Psychiatry/Neurology (R)-fluoxetine Prozac® $2,600 Potential for shorter washout and increased flexibility in treating depression Preclinical (S)-fluoxetine Prozac® N/A Potential prevention of migraine headaches Phase II (+)-zopiclone Imovane® $144 Potential for reduced anticholinergic side effects, including dry mouth Preclinical (patent issued 8/98) (S)-sibutramine Meridia® N/A Potential for reduced anticholinergic side effects including dry mouth and constipation Preclinical (R)-bupropion Zyban™ N/A Potential for reduced incidence of seizures, dry mouth and insomnia Preclinical Gastroenterology Norcisapride Propulsid® $1,000 Potential for improved potency without the adverse side effects of cardiac toxicity Preclinical (R)-ondansetron Zofran® $600 Potential for reduced cardiovascular side effects and improved efficacy Preclinical (S)-lansoprazole Prevacid® $1,000 Potential for improved dosing consistency and efficacy Preclinical (-) pantoprazole Pantozol™ $1,000 Potential for consistent plasma levels that may lead to better efficacy and safety Preclinical Antifungals (2R,4S)- intraconazole Sporanox® $550 Potential for reduced cardiovascular side effects Preclinical (R)-lomefloxacin Lomebact® N/A Potential for improved antimicrobial activity and decreased photosensitivity Preclinical

To: sam who wrote (1797)	2/20/1999 12:03:00 PM
From: David Howe	Read Replies (1) \| Respond to of 10280

A quick look at my earnings model. It's considerably simplified for this forum (mostly to help the shorts understand). The pipeline information in my previous post had a few numbers mixed in. Those are the approximate sales of the parent drug. They are the current sales, not the projected sales of a new improved product. They are stated in millions. The total on the list I posted is approximately $12 billion. If we estimate that SEPR receives a royalty on average of 10% we come up with a total potential for royalties of $1.2 billion (based on the current pipeline). We know that the monster deal with Lilly has royalties as high as the mid teens (14% my guess) once total sales exceed a certain level, so when I use 10% as an average royalty, maybe I'm being conservative. Let's say that 30% of SEPRs line doesn't get through the FDA or they decide not to pursue it. I think that's a conservative estimate as well. Remember that ICEs only take between 2 - 3 years to get from pre-clinical to NDA approval (launch) as opposed to an NCE (new chemical entity) that can take 5-6 years. The remaining 70% leaves us with $8.4 billion in sales and $840 million in royalties. Let's say that R&D, SG&A, overhead, etc. continue to cost about $1 per share per quarter (any comments?). That's about $140 million in expenses per year (fully diluted share count of around 35 million). Therefore, $840 million - $140 million = $700 million in pre-tax earnings. Taxes are a tough one to predict because SEPR has so many years of R&D expense that the offsets could go forward for quite awhile. I'll be conservative again and go with 30%. After tax earnings are now at $490 million. $490 million / 35 million shares = $14 per share in earnings $14 X 50 PE = $700 per share I didn't include anything beyond the simple royalty based business model. If you throw in just one billion $ product successfully brought to market by SEPR you can tack on another 400 bucks to that share price. Oh, that's right, Xopenex will probably get labelling approval from the FDA some time in March. Oh, that's right, SEPR is bringing that one to market on their own, and when expanded to all delivery methods, Xopenex has a market potential exceeding $1.4 billion. SEPR believes that Xopenex is only the first of 7 products they plan to bring to market on their own within the next 10 years. Something to think about. Facts by SEPR, everything else is just my opinion, Dave