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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (18)	2/28/1999 10:44:00 PM
From: Biomaven	Read Replies (1) \| Respond to of 52153

The trouble with MLNM of course is that it's as complicated as hell. Still, I suspect we'll learn something in the attempt. Here's a back-of-envelope and most likely off-the-wall valuation look at one portion of a third tier I own a little of - Titan (TTP). The objective is to value their share of Iloperidone, currently starting Phase III trials by Novartis. The deal is somewhat unusual, because the drug was developed by HMR, licensed to TTP and then licensed to Novartis. The consensus on the threads is that Novartis will pay a 15% royalty to HMR and 10% to TTP. (I have no personal knowledge of the accuracy of these numbers). Further, Novartis is alleged to be spending $100m on Phase III trials, which if anything I would think is conservative for a trial eventually involving 3,300 patients at over 200 sites in 28 countries. Let's assume these numbers are correct. Now Novartis only really owns maybe 50% of this drug, because they have to pay 25% royalties. (This 50% figure may be a bit low, depending on their margins. It is based on a 25% royalty being roughly equivalent to a 50:50 split). This gives the Novartis/HMR/TTP ownership as 50%/30%/20% So if Novartis is paying $100m in upfront trials for half this drug, we can be pretty sure that their risk-adjusted present value of their share of the drug is substantially more than this - say at least $300m. (Remember the drug would be worth a good few billion if ultimately even moderately successful). This would mean the TTP risk-adjusted present value for iloperidone alone is 2/5 of $300m, or $120m. (The PV's for Novartis/HMR/TTP are $300m/$180m/$120m). TTP is trading for around $50m over cash. Comments? Here's the trial announcement: Novartis Announces Launch of Phase III Trial to Evaluate Compound in Schizophrenia - Patient Recruitment Begins Across US - EAST HANOVER, N.J., Jan. 15 /PRNewswire/ -- Novartis Pharmaceuticals Corporation announced today the initiation of a Phase III clinical trial in the United States for Zomaril™ (iloperidone), a compound being evaluated for treatment of schizophrenia. The study is the first of several in the Zomaril™ Efficacy/Utility and Safety (ZEUS) program and is known as the ZEUS study (ILP3000). The ZEUS study has recently initiated patient recruitment and aims to enroll a total of 600 patients at 40 sites throughout the United States during the next eight months. When it is fully implemented, the ZEUS program will involve 3,300 patients at 208 sites in 24 countries worldwide. The ZEUS trial is designed to assess the safety and efficacy of three fixed doses of Zomaril™ in patients with schizoaffective disorder or schizophrenia. A devastating condition which affects nearly one percent of the world's population and 2.7 million Americans, schizophrenia is the most common and disabling of all major mental illnesses. Patients in the ZEUS study will receive free medication and be closely monitored on a regular basis by mental health professionals. To be eligible for participation in the trial, patients must be between the ages of 18 and 65, diagnosed with schizophrenia and exhibiting symptoms of the disease. ''Although there have been significant advances made in the treatment of schizophrenia over the past few years,'' said John Kane, M.D., chairman of psychiatry at Hillside Hospital, ''we still lack an optimal therapeutic agent and 20% to 30% of patients do not respond to the current therapies. Therefore research into new modes of treatment is vital for patients battling this horrible disease.'' Schizophrenia impairs patients' cognitive functions causing positive symptoms such as hallucinations and delusions, and negative symptoms such as blunted affect and social withdrawal. The disease typically strikes in late adolescence, with the onset of gross abnormalities in perception and an inability to feel or express pleasure. The profound incidence of suicide among schizophrenics is a well-documented public health problem. Commenting on Novartis' role in this program, A.N. Karabelas, CEO, Novartis Pharma AG said, ''By sponsoring this trial, Novartis is honoring its long-standing commitment to development of new compounds that may help patients suffering from schizophrenia to re-establish balance in their lives, regain personal independence and improve their overall quality of life. Zomaril is the leading late-stage product in our development program for schizophrenia.'' Novartis has been a leader in the management of psychotic disorders for several decades. Beginning in the 1950's with the introduction of Mellaril® (thoridazine), to the discovery of the breakthrough drug Clozaril® (clozapine) in the 1970's, the company has set new standards of care for patients with mental illness. The development of Zomaril™ (iloperidone), licensed from Titan Pharmaceuticals, once again demonstrates Novartis' commitment to this patient group. To obtain further information about the ZEUS Study, please contact Clinical Trial Leader Josephine Cucchiaro at 973-781-8155. Peter

To: LLCF who wrote (18)	2/28/1999 10:46:00 PM
From: scaram(o)uche	Read Replies (2) \| Respond to of 52153

"Wait"?? O.K., makes sense for MLNM, but..... try this one..... BTRN..... current market cap, $20.4 million. Cash in hand at end of last quarter, $20 million. Research premium relative to cash at end of last quarter....... approximately $0.4 million. XenoMune..... controlling patents, IMO, for at least a portion of the art, including PERV. Substantial technical hurdles which, to my knowledge, may never be overcome. Project supported by Novartis, royalties to BTRN of about 5% (my estimate). Market approximately $4 billion?? AlloMune for graft-versus-lymphoma/leukemia..... we'll see. AlloMune for solid organ transplantation...... not partnered, IND approved. Estimate of market is $1.4 billion, but may grow like a mushroom in peet, given success. MEDI 507..... phase II for GvH, phase I for psoriasis. 10% "true" royalty from MEDI, minimum (but I assume maximum too.... that is, it is double digit, and that's all we know). Controlling patents with big-time life span. I estimate the MEDI indications (GvH and autoimmunity, with solid organ transplantation back-burnered) to be $3 billion. So...... all of you gluttons..... Jeffrey?? David??....... that want to contribute to a valuation thread (yikes!)...... what's it worth? :-)