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Yes - interesting but extremely conservative.
Worth noting that Finncap target of £3.60 was based on COPD alone, without approval - double that with approval.
They explained that the COVID element is essentially impossible to value at the moment.
Thank you Tornadotony. I think that is solid analysis and as you highlight, that output can change significantly as you flex the variables. It gives me confidence that the share is cheap right now and could be very cheap.
However, it is probably the reality that the trusts will want the medics to prove it is cost effective over what they have currently apparently already bought for a second wave:
https://www.marketwatch.com/story/uk-approves-use-of-life-saving-coronavirus-drug-dexamethasone-in-biggest-breakthrough-yet-2020-06-16
So the cost benefit within nhs, will probably be done on how many days one is in hospital + increased deaths/intubation. I dont know how many days less you are in if you take dexamethasone. Also, dont know if anyone can tell me: i think they do different things so i am presuming you would take both as one is a steroid and the other an anti-viral? Is this correct? Anyone know? The chinese are giving interferon in their trials alongside another drug (posted earlier).
It is a useful exercise to try and do as you then ask is the science adequate and good enough to generate £50M in licence income per year net of any company costs. This gives a feel if the investor's average share bought price was in reasonable risk position in relation.
Good effort Tony - thanks for posting. It will of course be very sensitive to certain inputs and gives a good indication of how quickly that valuation might ramp up if you used more aggressive assumptions on profit margin (as someone suggested below) or PE ratio (a quick look online suggested pharmas are c26x currently and have typically been 20+ in the recent past) or even adjusting no of patients / allowing for govts stockpiling. Factoring in these you could argue a valuation several multiples higher. I personally believe this will get to double digit £s per share.
If they decided to treat the estimated 50,000 by the middle of next month then you could times that figure by 100. Trying to put a figure on this share is impossible at the moment until we get the awaited news of a partnership/ licence aggreement. The only thing that seems to be nailed on is that we should be well north of the current SP, even if it was just for COPD alone we are worth more than the current SP
Not when you add in panic buying.
My one question regarding £3.58 . If this was a true valuation and I'm not saying for one minute it isn't. Then why were millions of shares bought at a premium of £2.00 ? Surely that would represent a good return at those levels.
Pharmaceutical company’s don’t work on 21% margin
https://www.statista.com/statistics/473429/top-global-pharmaceutical-companies-gross-margin-values/
Then again UK warning of 50,000 cases per day by mid october if trend continues changes things......a lot.
Not sure if I am reading your post correctly Tony but I think your 20 patients a day is an underestimation. Where did you get this number from? From the data I have seen approximately 20% of infections require hospitilisation. Worldwide this is in the 10’s of thousands unfortunately.
Well to be fair it's a jolly good effort at a valuation. I do wonder where the 500 per day comes from though.
I hope you are ready for a battering! Ha
......sadly.
£3.58p
Apologies late at night its 3.58p a share.
Yes you are.....£3.58 a share.
yes...your reading him wrong..
sorry, £358 per share?
What? Have you arrived at £385 per share? or am I reading that wrong?
On the basis of £1400 revenue per patient, I have taken maximum profit level as 21% after all taxes and all costs (including marketing, debt interest etc) which give around £295 per patient. This has to be a minimal margin for a lot of companies. The health provider in western economies will know that if the patient stay is reduced by 3 days then half their cost is recovered if they are like an NHS provider.
I have then taken a figure of 20 patients in all of the UK either having COPD or Covid-19 requiring treatment every day in the NHS in a ratio of 1 COPD with 2 Covid-19 at the present time. I have multiplied this figure by 25 to give a global market (UK 4%). I have assumed low rate of market penetration for the product as other therapies and vaccines may be available and allows for swings during the year where it may be far higher and when it may be lower.
20 patients x 365 days x £295 = £2,153,500 UK net profit
£2.153M x 25 = £53.825M entire global market profit
53.825M/ 150M shares = 35.88p and at 10 PE rate gives a share value of 358.8p For treating a total of 500 patients per day.
As I mentioned before if 1/3 are COPD patients numbering 166 it gives a non-Covid value of 119p per share for the stock as on current market share price. So the current premium for Covid is about 61p a share if it were on the market. In future years the company would need to grow the COPD market to replace dwindling needs from Covid-19 patient numbers.
The key to the real valuation is the route to market. A large pharmaceutical company may take on more costs and have a deeper market penetration and get a better return on their costs. A smaller provider will have a lower margin and may offer a lower price to market the product for Synairgen. Overall it is interesting the broker arrived at a 360p price which equates to the 500 patients per year target.