** Updated SEPR Earnings Model **
The following Earnings Model is based on Sepracor's ICE Pharmaceutical Rollout information provided in their “Fact Sheet”. I've added the 1998 annual sales
of the Parent Drug. 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 100%.
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 at the right side of each product analysis. 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 Parent Sales Safety Factor Est. Royalty Est. Revenue 2003 Revenue 2006 Revenue 2009 Revenue
Xopenex (Levalbuterol) Ventolin / Proventil 1999 $1,400,000,000 15% 100% $210,000,000 $308,558,896 $688,695,344 $867,557,789
Desloratadine (DCL) Claritin 2000 $2,300,000,000 70% 6% $88,550,000 $130,109,001 $163,899,870 $206,466,633
Noricisapride Propulsid 2001 $1,000,000,000 90% 14% $126,000,000 $185,135,338 $233,217,206 $293,786,514
Norastemizol Hismanal 2001 $600,000,000 50% 50% $150,000,000 $220,399,212 $277,639,532 $349,745,850
(S)-oxybutynin Ditropan 2002 $150,000,000 40% 100% $60,000,000 $88,159,685 $111,055,813 $139,898,340
(R)-fluoxetine Prozac 2002 $2,800,000,000 70% 14% $274,400,000 $403,183,624 $507,895,250 $639,801,741
(R,R)-formoterol Foradil / Atock 2002 $140,000,000 60% 100% $84,000,000 $123,423,558 $155,478,138 $195,857,676
(S)-doxazosin Cardura 2002 $700,000,000 50% 14% $49,000,000 $0 $90,695,580 $114,250,311
(-)-cetirizine Zyrtec 2002 $700,000,000 50% 14% $49,000,000 $0 $90,695,580 $114,250,311
Desmethylsibutramine Meridia 2002 $1,000,000,000 50% 14% $70,000,000 $0 $129,565,115 $163,214,730
(R)-ketoprofen Orudis / Actron 2002 $200,000,000 30% 15% $9,000,000 $0 $16,658,372 $20,984,751
Desmethylvenlafaxine Effexor 2002 $500,000,000 30% 15% $22,500,000 $0 $41,645,930 $52,461,877
(R)-bupropion Zyban / Wellbutrin 2003 $650,000,000 70% 15% $68,250,000 $0 $126,325,987 $159,134,362
(+)-zopiclone Imovane 2003 $150,000,000 50% 15% $11,250,000 $0 $20,822,965 $26,230,939
Nefazodone metabolite Serzone 2004 $230,000,000 50% 15% $17,250,000 $0 $31,928,546 $40,220,773
(-)-pantoprazole Pantozol 2005 $300,000,000 50% 100% $150,000,000 $0 $277,639,532 $349,745,850
(R)-ondansetron Zofran 2006 $600,000,000 70% 15% $63,000,000 $0 $116,608,603 $146,893,257
Hydroxyitraconazole Sporanox 2007 $550,000,000 70% 15% $57,750,000 $0 $0 $134,652,152
(-)-amlodipine Norvasc 2007 $2,700,000,000 50% 15% $202,500,000 $0 $0 $472,156,897
(S)-salmeterol Serevent 2008 $700,000,000 50% 15% $52,500,000 $0 $0 $122,411,047
(S)-Iansoprazole Prevacid 2009 $1,800,000,000 50% 15% $135,000,000 $0 $0 $314,771,265
$19,170,000,000 $1,949,950,000 $1,458,969,314 $3,080,467,362 $4,924,493,062
Sepracor Product Parent Drug Rollout Date 1998 Parent Sales Safety Factor Est. Royalty Est. Revenue 2003 Revenue 2006 Revenue 2009 Revenue
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.
Fiscal Year Total Sales $ / Share SG&A R&D Misc Gross Earnings Tax Rate Net Earnings
2003 $1,458,969,314 $35.58 $7.00 $8.00 $2.00 $18.58 32.0% $12.64 Per Share
2006 $3,080,467,362 $75.13 $12.00 $15.00 $4.00 $44.13 32.0% $30.01 Per Share
2009 $4,924,493,062 $120.11 $21.00 $20.00 $7.00 $72.11 32.0% $49.03 Per Share
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. Potential costs to defend patents, such as legal fees, are included.
Of course, all of this is only my opinion and there are risks involved with any investment.
Dave
Notes / Revisions:
March 21, 1999
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.
March 24, 1999
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.
April 4, 1999
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.
April 20, 1999
Increased 1998 Prevacid 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.
April 29, 1999
Deleted (S)-doxazosin, (-)-cetrizine, Desmethylsibutramine, (R)-ketoprofen and Desmethylvenlafaxine from 2003 revenue projection (an effort to make the
earnings model more conservative).
Increased Safety Factor for (R,R)-formoterol to 60% after it passes Phase II Trials with good reports.
From Annual Report: Adjusted a number of the 1998 Parent Drug Sales to reflect the estimates given in the report. One example is an increase in (-)-amlodipine Parent
Drug Sales to $2.7 billion. I was dramatically low with my original estimate. Norvasc manufactured by Pfizer is the parent drug.
Shifted $2 per share from R&D costs to SG&A expenses (all years).
Added Nefazodone metabolite (Serzone ICE, parent drug from Bristol-Meyers Squibb) a completely new drug for the earnings model!
Note from 10k: (S)-fluoxetine is still in the works to treat Migranes. The parent drug can be considered to be Imitrex by GlaxoWellcome.
|
