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

To: David Howe who wrote (2487)	4/20/1999 10:48:00 PM
From: David Howe	Read Replies (1) \| Respond to of 10280

Now is as good a time as any to post an updated earnings model. See the end of the next post for a summary of the latest revisions. -------------------------------------------------------------------- Updated Earnings Model The following Earnings Model is based on Sepracor's ICE Pharmaceutical Rollout information provided in their “Fact Sheet”. I've added the annual sales of the Parent Drug for 1998 (several are estimated and are marked with a ?). A safety factor (ie. 50%) is included to account for the fact that the drug may not reach the market and may not take the entire market share of the Parent Drug. If applicable, an estimated royalty % is indicated and if Sepracor will market the product on their own, the Royalty is indicated as NA. Using these factors the Estimated Annual Sales for each drug candidate is calculated. Because the pharmaceutical market is continually growing, the model applies an 8% annual growth rate to the sales of each product. Products that Sepracor is bringing to the market in stages (ie. Xopenex) are adjusted upwards in the years following their initial launch. The estimated sales for Fiscal Years 2003, 2006 and 2009 are indicated on the lower line of each product analysis and are in [$ million]. These numbers are intended to account for market growth and the staged launch of certain products. Following the individual product Annual Sales projections I've summarized Sepracor's Estimated Total Revenue Per Year and subtracted estimated costs for SG&A, R&D, Miscellaneous (ie. product costs, license fees, patent fees, interest) and Tax @ 32%. The Net Earnings Per Share are the end result, and are indicated for Fiscal Years 2003, 2006 and 2009. If you are interested and have time, please review this information and comment on any part of the model that you feel needs alteration. Sepracor Product... Parent Drug... Rollout Date….. 1998 Sales of Parent… Safety Factor… Estimated Royalty… Revenue $ Xopenex (Levalbuterol).. Ventolin/Proventil.. 1999 $1.4 billion.. 15%.. NA.. $210 million [2003 $309 million] [2006 $689 million] [2009 $868 million] Desloratadine (DCL).. Claritin.. 2000 $2.3 billion.. 70%.. 5.5%.. $89 million [2003 $131 million] [2006 $165 million] [2009 $208 million] Noricisapride.. Propulsid.. 2001 $1 billion.. 90%.. 14%.. $126 million [2003 $185 million] [2006 $233 million] [2009 $294 million] Norastemizol.. Hismanal.. 2001 $600 million.. 50%.. 50%.. $150 million [2003 $220 million] [2006 $277 million] [2009 $350 million] (S)-oxybutynin.. Ditropan.. 2002 $130 million.. 40%.. NA.. $52 million [2003 $76 million] [2006 $96 million] [2009 $121 million] (R)-fluoxetine.. Prozac.. 2002 $2.8 billion.. 70%.. 14%.. $274 million [2003 $402 million] [2006 $507 million] [2009 $639 million] (R,R)-formoterol.. Foradil/Atock.. 2002 $140 million.. 30%.. NA.. $42 million [2003 $62 million] [2006 $78 million] [2009 $98 million] (S)-doxazosin.. Cardura.. 2002 $600 million.. 40%.. 14%.. $34 million [2003 $49 million] [2006 $63 million] [2009 $79 million] (-)-cetirizine.. Zyrtec.. 2002 $550 million.. 50%.. 14%.. $38 million [2003 $56 million] [2006 $70 million] [2009 $89 million] Desmethylsibutramine.. Meridia.. 2002 $1 billion (?).. 30%.. 14%.. $42 million [2003 $62 million] [2006 $78 million] [2009 $98 million] (R)-ketoprofen.. Orudis/Actron.. 2002 $200 million (?).. 30%.. 15%.. $9 million [2003 $13 million] [2006 $17 million] [2009 $21 million] Desmethylvenlafaxine.. Effexor.. 2002 $200 million (?).. 30%.. 15%.. $9 million [2003 $13 million] [2006 $17 million] [2009 $21 million] (R)-bupropion.. Zyban.. 2003 $500 million (?).. 50%.. 15%.. $38 million [2003 $0 million] [2006 $69 million] [2009 $87 million] (+)-zopiclone.. Imovane.. 2003 $144 million.. 50%.. 15%.. $11 million [2003 $0 million] [2006 $20 million] [2009 $25 million] (-)-pantoprazole.. Pantozol.. 2005 $500 billion.. 50%.. NA .. $250 million [2003 $0 million] [2006 $463 million] [2009 $583 million] (R)-ondansetron.. Zofran.. 2006 $600 million.. 70%.. 15%.. $63 million [2003 $0 million] [2006 $117 million] [2009 $147 million] Hydroxyitraconazole.. Sporanox.. 2007 $550 million.. 70%.. 15%.. $58 million [2003 $0 million] [2006 $0 million] [2009 $135 million] (-)-amlodipine.. Norvasc.. 2007 $300 million (?).. 50%.. 15%.. $23 million [2003 $0 million] [2006 $0 million] [2009 $54 million] (S)-salmeterol.. Serevent.. 2008 $300 million (?).. 50%.. 15%.. $23 million [2003 $0 million] [2006 $0 million] [2009 $54 million] (S)-Iansoprazole.. Prevacid.. 2009 $1.8 billion.. 50%.. 15%.. $75 million [2003 $0 million] [2006 $0 million] [2009 $315 million] "Partial list" Continued on next post

To: David Howe who wrote (2487)	4/20/1999 10:50:00 PM
From: David Howe	Respond to of 10280

Continued from prior post: Totaling the above numbers results in Total Annual Revenue for 2003, 2006 and 2009 as follows (see below). When the sales are Royalty based, the only direct costs involved is Tax and the cost of counting the money. With products that are brought to market by Sepracor themselves, there will be considerable sales, marketing, administration and product costs to take into account. There will also be significant R&D costs as they continue to add to and develop their pipeline. These costs were estimated by reviewing the financial reports of a number of pharmaceutical companies. The % cost vs. revenue for the comparable companies was applied in proportion to the ratio of products Sepracor licenses vs. markets on their own. SG&A, R&D, Miscellaneous (ie. product costs, license fees, patent fees, interest) and Tax are subtracted from the Total Sales resulting in an Estimated Net Earnings Per Share. FY 2003 … $1.59 billion in Sales = $39 per share - $5 per share (SG&A) - $10 per share (R&D) - $2 per share (Misc) = $22 per share in gross earnings – 32% (Tax) = $14.9 per share in net earnings. FY 2006 … $2.96 billion in Sales = $72 per share - $10 per share (SG&A) - $17 per share (R&D) - $4 per share (Misc) = $41 per share in gross earnings – 32% (Tax) = $27.9 per share in net earnings. FY 2009 … $4.29 billion in Sales = $105 per share - $19 per share (SG&A) - $22 per share (R&D) - $7 per share (Misc) = $57 per share in gross earnings – 32% (Tax) = $38.8 per share in net earnings. The above earnings estimates are based on the current pipeline only. They do not include new products that Sepracor may place in the pipeline that we are unaware of at this time. On the other hand, they do not include competition from products beyond the ones on the market at this time. The estimates do not include the possibility that because the ICE is improved / safer / longer acting / has lower dosing / etc. the Sepracor product may obtain more of the total market than the parent drug. In fact, the estimates are at a significant discount to the current market share of the parent drug, sometimes factoring the expected sales down to as low as 30% of the parent drug. The estimate does not include the possibility that Sepracor could bring considerably more of these drugs to market on their own. If they did, the numbers would increase significantly (this will most likely be a factor down the road, beyond 2003). On the other hand, this model doesn't account for the FTC activities which, IMO, are unlikely to amount to anything. The possibility that a challenge of a Sepracor patent or patents may occur is not included, but could happen. Of course, all of this is only my opinion and there are risks involved with any investment. Dave Notes / Revisions: 032199 Increased Claritin Sales to $2.3 billion (latest estimate) from $1.7 billion (earlier estimate). Growth rate left at 8% despite reports of estimated 30% per year growth due to market penetration still minimal. 032499 Increased the Prozac ICE royalty to 14%. Increased safety factor to 70% after learning that they are already in Phase II trials. This has progressed faster than expected. Great news. Increased fully diluted share count to 41 million. Revised the $/share costs of R&D, SG&A and other expenses. With higher share count the model automatically increased these costs since they were formulated on a $/share basis. The $/share numbers were reduced to account for this and to also adjust for the fact that my R&D estimates were higher than they should have been. Xopenex Final Approval handed to Sepracor yesterday after the close. Press release looked great. Clearly states the fact that there are significant improvements of the single isomer product vs. the racemic product. 040499 Revised Pantozol to reflect Sepracor's indication that they will develop and market this product on their own. Adjusted 2009 revenue and earnings estimate to show similar tax rate. Corrected math error in 2009 revenue. 042099 Increased 1998 Prevacide sales to $1.8 billion from $1.0 billion based on latest data. FDA letter regarding Xopenex is a non-factor. Prozac sales slowing 4% is a non-factor already accounted in the earnings model by the conservative safety factor. Note that the Prozac ICE may be a better product and sales may increase because of this. IMO the earnings model remains conservative.