Valuation Part 1 - Covid4 Jul 2021 09:57
I’m going to value SAR in 5 components: Tyk2 Covid, TYK2 Immune, TYK2 Cancer, SRA737, Aurora & SKIL (the last two I’ll combine because I have little to work on). So, first of all to Covid. We know that pre-clinical POC is ‘encouraging’ and will almost certainly go to the clinic. How it gets there is another thing. I’m basing my model on Dexamethasone because the pricing of that drug is at the bottom end of the scale (£11.45 in the UK) as opposed to Remdesivir (£1,590 per course). When I ran the model with Rem it couldn’t cope with all the zeros. It would even have made Thoth’s eyes water! I’ve based my model on 10% of the UK adult population needing 1 course each year. This seems reasonable as the NHS will need to take a precautionary approach to prescription – better to prescribe and it not be needed than not to and have a hospital case (and a legal case to follow if a death occurs). I have then used a PE of 10 which is an underestimate because the patent on 1801 is much longer. I have then assumed that if it works in the UK we will see it rolled out in the US and EU. I have allowed nothing for Africa, India and South America as we may need to be philanthropic. I have also allowed nothing for China and Russia because they will simply copy it. On this basis I have then discounted the value by 85% as this is still a high risk drug (in terms of success). However, my model shows that even at this discounted rate it commands a SP of 25.9p. If it goes the whole way then we have a drug worth a SP of £1.72 at today’s prices and the current number of shares in circulation. Pricing the drug at £11.54 with a margin of 80% is most likely a significant undervaluation. Even the cost of drugs to treat Shingles is more than twice that. I therefore see these figures as minimums.
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