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Biotech / Medical : Zonagen (zona) - good buy? -- Ignore unavailable to you. Want to Upgrade?

To: Bob Trocchi who wrote (6240)	2/26/1999 1:03:00 AM
From: Bruce Rosen	Read Replies (1) \| Respond to of 7041

Bob, I would like to comment on three of your assumptions. First, I am not certain that the drop-off in Viagra sales indicates a smaller than expected market. Remember the frenzy when Viagra was first introduced last April? I believe people are still interested in sex. I believe that an important factor in Viagra's fall in sales is concern over side effects. In my last post I mentioned those that I am aware of. People on nitrates, with high blood pressure and other cardiac problems. People concerned with the vision problems or liver complications that professional organizations have warned against. Enough negative publicity can scare people away. People who suffer from the side effects which Pfizer reported from their studies. Approximately 8% of people suffer from headaches. Another 8% suffer from stomach upset. If Schering can capture the above market, Vasomax could have a sizable amount of people trying it. If 30-40% of those who try it have success, as Zonagen has been claiming all along, this could represent a solid base of repeat sales. You are right about new drugs coming along. Zonagen claims to be working on one of them. These new compounds may actually increase the overall market. As the baby boom generation continues its inexorable march to old age, the target population for this market increases. Secondly, I question your assumption that only 20% of the royalties will drop to the bottom line. Remember, Schering pays for manufacturing, advertising and everything else having to do with the marketing of Vasomax. The great majority of the royalty stream flows directly to the bottom line. How does that affect your numbers? Third, some analysts have estimated eventual sales of $800 million for Vasomax. Even if you believe that is unlikely, in the interests of quantifying a worst case scenario(from a short's perspective of course), you might want to calculate the earnings and PE of Zonagen if 20% of that, or $160 million should fall right to the bottom line. Good Luck.