Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
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Thanks Chengdo4, yes the property is theirs but I guess we will just have to wait for answers to `production`. If the strip is successful and then getting the approval is a quick formality then the only question for me is how many can be made and how quickly. You cannot sell what you have not made (apart from pre-order). We know the distribution, we know the affimers, lets hope we can have further success next week.
RD - you’re welcome, and it’s just an Excel model, using the Rand() function to randomise. Perhaps learning some proper coding should be my backup plan in case the oil industry truly falls over and I can’t retire on Avacta profits! I’m not counting on that of course, but one may dream. ;)
Interesting point on current production capacity - If 2bln per annum that’s 170mln/month - even if current actual production were less than capacity, you can see why AS is talking to other businesses than Cytiva! Also I’ve seen the predicted future $9 bln dollar LFD testing market figure in a couple places, and important to note that this is for all types of test, and from Nov 2019, hence preceded the pandemic. I daresay you could notch that number up a few pegs now.
@C - I think your low/med/high/cases are too extreme.
If you look at the profit per test to Avacta for your cases you are about $1, $5, and $13. So just on the profit per test your high low ratio is a factor of 13!
Below I have copied Kbiz post from 2nd May and he appears to have the right idea. You can adjust his numbers based upon recent news.
To try and get an accurate estimate price of the test I would guess it would lie between today's cost of a prego test and an HIV test which AS referenced in his webcast the other week. Thanks for your effort it deserved a reply.
Kbiz - copyright:
Taking another stab at the current valuation, and where this can go from COVID.
Assumptions:
- Fair value before COVID - £100m
- COVID testing requirements constant for 6 months minimum, 12 months maximum
- Successful vaccine eventually replace need for mass testing in 12 months
- Only adults tested
- 5% royalty for AVACTA - https://www.morse.law/news/setting-values-and-royalty-rates
- Additional market cap for covid = 2x 12 month earnings (based on the value of cash generated + derisking of future operations from this)
Variables:
- % of adult population tested
- % market share
- Cost per test
- Tests per adult
The case for £3:
- 7.7bn world population
- 3.85bn adults for testing
- 30% of adults regularly tested globally
- 1 test per week per adult = 26 tests min, 52 tests max
- Cost per test £2
- 10% market share
= £300m earning in 6 months or £600m in 12 months
Taking £300m earnings, x 2 = £600m + £100m pre-covid valuation = £700
I Would be over the moon with a 10 million starter
Has to be licensing. Unthinkable to set up operations/ production lines for billion test.
More lucrative also.
PL75 - I agree with you wholeheartedly. Something amiss with the figures there - I think some of us must be just enjoying a bit of fun this long weekend off!
PK75.
SNAP.
I'm writing to AZ and GSK as we speak and asking whether they would mind being taken over.
99.9% chance of success
1.2B tests per month
Yet the sophisticated market investors haven't bought in at a price that would make them billionaires over night. Time to up the dose.
Wow RK has gone for 1.4Bn per month! And I said I was bullish on the size of the market.
With a profit of £4 a test, we’ll soon have monthly profit of 5.6Bn, 67Bn pa. On a PE ratio of 10 we’ll be worth 670Bn and will be in the top ten most valuable companies on the planet.
I mean, I’ve read some ramps in my time...
RK, Wholeheartely endorse your last para.
Cheers
GLA
Thanks for your earlier reply KingKitega, yes my question still remains, who can produce these devices on a massive scale for perhaps very high short term demand globally if the device works. We can distribute it but how can we produce it? You can only sell what you can make? Any ideas on companies out there?
Thanks CO. Just to put things in perspective. The global lateral flow market is currently between US$5-6bn , and around 2bn tests are produced each year. So somehow somewhere there needs a massive scaling up of capacity to meet the most optimistic of expectations here. Possible, but won't happen overnight.
- Probability the Avacta rapid POC LFD covid-19 test will be successfully released to mass demand:
99.9%
- Average price per test sold (bearing in mind bulk orders may be heavily discounted):
£13
- Cost of manufacturing per test:
£2.40
- Other costs per test e.g. distribution, admin:
£5.60
- Avacta % of profit share with Medusa19:
28%
- Number of months of mass demand:
24
- Average number sold per month of mass demand:
1.4 Billion (20% of the world population)
Why Avacta has the advantages over every other quick test?
1. It will work and will be approved.
2. It will prove as accurate as any lab test, and will become the standard.
3. It will be used everywhere and results in minutes.
4. With scalability it will always be the lowest cost.
5. It can be licensed to be produced by any medical device manufacturer.
6. Distribution is easy, high numbers of devices with no temperature control environment requirements.
7. It answers the requirements of every government, hospital, business and travel company.
What will come from this?
1. The growth in mass testing and diagnostics using Affimer technology across the globe - $9 billion dollar market
2. Acceptance of Affimer therapeutics technology, using Avacta pre-CISION technology for chemotherapy and many other treatments saving hospitals time and money!
3. Multiple partnerships with every large pharmaceutical company in the world
What’s in it for Investors?
1. Solid growth potential for investors
2. Long term dividends from strong profits
3. Potential buy out for a premium of the days market price rewarding all investors who stay the course
4. Being involved in a British Biotech company that changed diagnosis and medication for ever!
Cheers RK
Appreciate your work CO, thanks
Pleased to see the % chance of success has been dropped. :-) I’d add market share % which would temper down the number, but on the flip side I’d be bullish on the size of the global market. As Sir Al said, we’ll need additional manufacturers and demand will exceed supply. Currently we don’t know the capacity constraint though. Lots to ponder until all is revealed...
...e gardening. Enjoy the long weekend, all!
That looks like a shed load of work and thank you. Bootstrap? or are you a health economist in your spare time ??
Onto some estimates. Let’s start with the caveat this is just a model – note all models are wrong, but some are useful. I hope this, or the thought process that goes into it, is useful for you, but please don’t invest based on these numbers. As always, DYOR.
For each variable I have estimated a plausible low/mid/high scenario, and run 1000 realisations sampling each one at random – assuming low/mid/high cases are equiprobable, and the variables are independent. There is also no time discount on future money. All this is basic and could be challenged – but hey, it’s a simple model. The low side numbers consider e.g. it is launched into a crowded market and gets lower share and higher price competition, it is launched late, covid is defeated quickly, and Medusa get most of the profits. The high side considers hundreds of millions of tests are needed for the next few years, as Avacta have stated, and that it pays well.
Inputs used (Low/Mid/High cases):
Average price per test sold: $12 / $15 / $20
Cost of manufacturing: $2.5 / $2 / $1.5
Other costs per test: $6 / $3 / $1.5
Avacta % of profit share with Medusa19: 25% / 50% / 75%
Average sales per month (millions): 10 / 50 / 200
Number of months of high demand: 6 /12 /24
The calculation (as requested by KingKitega) for each realisation is simply (Price-Costs)*(Avacta %)*(Sales/month)*(# months)
Multiplying through the worst case/base case/best case numbers would give:
Avacta profit per test: 0.72 / 4.1 / 10.45 GBP (Myles recently suggested £4 on twitter, which is consistent)
Total sales volume (millions): 60 / 600 / 4800
Avacta profit: 43 / 2,459 / 50,164 mln GBP
Note that at the left end of the distribution we are below the current market cap. Here are some numbers from the distribution:
Minimum: 43 mln GBP
85% chance of exceeding: 369 mln GBP
50% chance of exceeding: 1,967 mln GBP
15% chance of exceeding: 11,269 mln GBP
Maximum: 50,164 mln GBP
Mean value: 5,158 mln GBP
Of course, any value from this test should be accreted to a market cap that includes the other projects Avacta are working on, but just for fun, let’s compare directly to market cap.
- The % of realisations that exceed current market cap of 400 mln GBP is 83%. With 80% chance of success, this would mean I estimate a (0.83*0.8) = 66% chance the value of tests alone will exceed present market cap.
- Strictly speaking, we should use (chance of success)*(mean success value) to estimate the accretive value to Avacta; with 80% risk this would be 4.1 billion GBP. Whether you feel comfortable with that knowing 70% of success cases are worth less than that is up to you.
Again a final plea to use with caution. Don’t take these probability estimates as calculated truth – they are just estimates I did for a bit of fun. If you disagree with the inputs, adjust your expectations accordingly. And remember there is so much more to Avacta! Right, now i should probably go outside for a run and/or som
Wow, that got a lot of responses! Thanks everyone that commented, even those saying it was all a useless load of rubbish. You may well be right.
First, just to say we sometimes do this sort of exercise in my line of work for estimating risk/volume on oil/gas prospects, and often find the discussion you have is at least as valuable as the numbers you get. Some key points for me were:
- Risk is the most important thing, and may depend not just on whether it works and gets approved, but also on other factors, such as how long that takes, and probability of execution.
- Stanman with his medical background sees only a 50% chance of success for this test. I’m guessing he hasn’t concentrated his portfolio as much as some of the others here! That said, Ophidian (from a long high-level pharma background) estimates as high as 90% chance of success. He has also clearly had his coffee this morning! Elsewhere his Myles McNultyness has recently estimated c.90%. I favour about 80% and will use this below.
- 54retiresoon rightly points out not all will be sold through Medusa19, but we don’t know any details on partners for other distribution routes yet, so for better or worse, I’ve lumped it together for now.
- Minimil likes 10% of the dross better than this discussion.
Probability rapid covid-19 test is successfully released to mass demand: Moves to 99%
------- Based on the assumption we stay to be the fastest/cost effective test, and demand moves nationwide to worldwide!
- Average price per test sold (bearing in mind bulk orders may be heavily discounted): £10.00
------- The key here being a low cost effective affordable test to market to EVERYONE and not just a group select!..
------- So from poor to rich, regardless and sales route, so over the counter and online!
- Cost of manufacturing per test: £1 (or less)
------- The manufacturing aspect on a bulk scale is the cheapest aspect, and with our test on a stick..
------- This process is extremely fast and cheap and highly scaleable
- Other costs per test e.g. distribution, admin: £1.00
------- This really depends on the quantity made for distribution over the amount of workforce required to be involved
- Avacta % of profit share with Medusa19: Hard to put a figure exactly, ~30-40%
- Number of months of mass demand: Greater than 12 months!
------- Bearing in mind the cost being the cheapest on the market over accuracy
------- There won't be a single country that won't want it!
------- THAT's a BIG market to fill!
- Average # sold per month of mass demand: Greater than 20 million and could easily reach 60 Million
------- Assuming the production demands can be met!
Im absolutely convinced the efficient market model would work if it wasn't for all the nudge and wink stuff that goes on. Surprising how often price moves before announcements. Didn't Archer get lucky once buying shares in company his wife was making an announcement about the next day. Don't get me started on Boohoo.
Ha! I’m not so sure the efficient markets hypothesis always holds.
As I said your post wasn’t that far from the broker notes, they pretty much modelled the current share price to be fair market value (no, really?) and wouldn’t put any value to the Covid stuff - they either have us on 0% chance of success or they don’t want to risk their reputation saying we should be worth billions. I’m sure it’s the latter.
Aaaaagh. I mean £1.87.
We are in unknown territory along with the rest of the world so purely a bit of fun for now but indicates the sheer scale of possibilities!
Sorry PL75. I was being obtuse. Current share price is £1.83. I'll go and stand in the corner.
Typo: Should have been £18!
Here we go! These are the inputs we need:
- Probability rapid covid-19 test is successfully released to mass demand: 95% +
- Average price per test sold (bearing in mind bulk orders may be heavily discounted): £18 Not 28 as typed previously!
- Cost of manufacturing per test: £3
- Other costs per test e.g. distribution, admin: £2
- Avacta % of profit share with Medusa19: 50%
- Number of months of mass demand: 20
- Average # sold per month of mass demand: NAFC! Quite a few!!