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

To: Anaxagoras who wrote (168)	5/21/1999 11:08:00 AM
From: Anaxagoras	Respond to of 190

Let me emphasize that I'm not the originator of this model that I use below, and frankly, this is the first company I've run through it, but it makes some sense. However, it is very crude in the hands of a non-expert like myself when it comes to predicting market penetration of the products. I have tried to err on the side of heavy conservatism as I think you'll see. I would appreciate any criticisms folks may have. I've obtained the data on the pipeline and the market size for certain indications from the company's web site, specifically the page here: cocensys.com The market size data I'm using is what they give for actual 1998 worldwide sales, not the higher 2001 projections. cont. Anaxagoras

To: Anaxagoras who wrote (168)	5/21/1999 11:16:00 AM
From: Anaxagoras	Respond to of 190

cont. For each compound I've listed the following, each on a separate line: Name of Compound Targeted Indications Stage of Development Owner of Commercialization Rights Anaxagoras' Wild, Wild Valuation Guess Using the Model Let's begin.... Here's the Pipeline: Sodium Channel Blockers: 1. Co 102862 For neuropathic pain and epilepsy Preclinical development CoCensys Value: $5M GABAA Receptor Modulators: 1. CCD 1042 Ganaxolone (Anticonvulsant) For epilepsy, including complex partial seizures and infantile spasms (a) Catamenial epilepsy trial commenced April 1999, (b) completed Phase IIA trials for infantile spasms and complex partial seizures in adults CoCensys Value: 30% of the epiliepsy market is unserved. Assume Ganaxolone is a niche product that captures a small fraction of this, or 1% of the total market of $3.2 billion, i.e. $32 M. Discount it to $12.8 M. 2. CCD 3693 (Sedative/Hypnotic) Insomnia Phase I CoCensys Value: No sales data, so treat it as preclinical and throw in $5M. 3. Co 2-6749 (Anxiolytic) Anxiety disorders Pre-clinical development Wyeth-Ayerst Value: Since someone else has the commercialization rights and it's pre-clinical, ignore it. 4. CCD 1042 Ganaxolone (Antimigraine) For migraine - prophylaxis ----- CoCensys Value: This is the compound that caused the problems last year with disappointing results, but it appears to work in a subset of the study's population. Ignore it. Glutamate Receptor Antagonists: 1. Licostinel Stroke, Tinnitus, and Substance Abuse Phase I trials for stroke completed; preclinical studies for tinnitus ongoing; potential for treatment of eye disorders and substance abuse under evaluation CoCensys Value: The market for stroke alone is $5.2 billion. Assume arbitrarily that this compound serves a micro-niche of 0.5%. Discount the resulting $26 million and round to $8 M. 2. SSNRAs Cerebral ischemia, Parkinson's disease, epilepsy, and chronic pain. Selected eye disorders Discovery Warner-Lambert and Senju Value: Skip it. Caspase Inhibitors: 1. Dipeptides Neurodegenerative and cardiovascular diseases, cancer, antiviral Research Cytovia Value: Skip it. cont.

To: Anaxagoras who wrote (168)	5/21/1999 11:21:00 AM
From: Anaxagoras	Read Replies (1) \| Respond to of 190

cont. So, totaling what we have so far gives us.... SUB TOTAL= $30.8 M. COCN also has 23 issued U.S. patents on its technology = multiply by $0.5 = $11.5 million. (We'll ignore the other 21 U.S. patent applications along with the corresponding foreign patents and patent applications.) SUB TOTAL of market cap from technology and patents = $42.3 M PLUS CURRENT ASSETS MINUS LONG TERM DEBT = (using info from the 10Q for Q ending 3/31/99) $9.275 M - $0 = $9.3 million, rounded. TOTAL= $42.3 M + $9.3 M = $51.6 M Now, according to the model, one should add in a "management factor", computed as follows. MANAGEMENT FACTOR: ACCUMULATED DEFICIT = $116,151 (as of 12/31/98) REVENUES LAST FIVE YEARS = $89,233 (as of 12/31/98) *MARKET CAP MANAGEMENT FACTOR = (89,233/116,151) = 0.77 MULTIPLY $51.6 M times 0.77 = $39.7M TOTAL MARKET VALUATION (management factor plus valuation) = $91.3 M. Now we take this down to a per share figure. SHARES OUTSTANDING = 4,633,000 as of 5/17/99, per the 8-K FAIR VALUE SHARE PRICE (according to the model) = $19.71 CURRENT SHARE PRICE = $1.25 To sum up, according to the model the shares of COCN are undervalued by $18.46, or about $85.5 million in market capitalization. IOW, they are trading at about 6% of their "fair value" price according to the model. That's it. Anaxagoras