Below mostly uses Spectral's own figures
Per Spectral the $ 2B US addressable market is approx. $ 2B USD per annum
(this is based on 140,000 patients x 2 PMX columns x $ 6750) or 140000x2x6750= $ 1,900,000,000
Probem 1:
But Laser consultant report indicated a US market pricing of $ 7,500 per PMX column (back in 2016)
If the life saving potential goes up, inflation rises, and so too does Trial costs go up,typically so too does the price. But to be conservative lets just use $ 7,500 per column. 7500/6750 = 1.11 so lets apply that factor to the EBITDA calcs.
Problem 2
Canada not included. Rights are for NA. As far as I can tell the Commercialization Slide only addresses the US market and ignores Canada. Canadian population is 11% of the US popultion so lets apply a factor of 1.11
Problem 3
Many studies have shown the benefits of a 3rd (and even perhaps) a fourth column in cases where the EAA remains stubbornly high, but it is still having an effect (of lowerinig Endotoxins and potentially aiding in organ recovery). Let's apply a factor of 1.25 to recognize the dosage issue and assume that in some cases a 3rd column will be necessary. I'll try to russle up the Study references suggestign the benefits of additonal columns of PMX on results.
Problem 4
The EBITDA chart assumes various market penetrations ranging form 7.5% to 50%. But it is all based on 140,000 patients. So a 40% marke penetration assumes only 56,000 patients would be treated. Upon FDA approval, PMX/EAA woudl in theory become the new standard of care for patients with gram negative Sepsis, with elevated SOFA scores. Not sure why any hospitals would refuse giving any patients (even those expected to die as JK mentioned) the new SOC in an attempt to save their life.
Secondly the very next slide boldly highlights the fact that "As many as 300,000 to 400,000 patients in the US per annum may be appropriate for PMX " So wouldn't a 40 % penetration on say 350,000 (the midpoint) = 140,000 patients (at 40% penetration of the "appropriate market) So instead of usinig 56,000 patients (at 40%) shouldn't they use 140,000 patients? 140,000/56000 = 2.5 or the factor to bring the penetration calcs up to the PMX "appropriate" market.
So what does this all mean? It suggests to me that the appropriate addressable EBITDA is actually much higher than the chart on page25 might first indicate.
If I select the 40% EBITDA column and choose the Total Spectral EAA/PMX EBITDA Potential (which assumes revenue sharing with someone like Baxter) and apply the above factors we get a revised EBITDA.
In applying just the first 3 adjustment factors (higher price, incl canada, addit columns in some cases) I get a revised EBITDA of:
$ 247M x 1.11x1.11 x 1.25 = $380M USD EBITDA (at 40 % market penetration only - despite it being presumably the new SOC)
And if I apply the last factor (higher usage) I get:
$ 380M x 2.5 = $ 951M USD EBITDA
Seto was correct iin stating that EBITDA multiples in this type of industry range from 10X to 25X in order to try to determine the appropriate market cap/value to a prospective acquirer.
So moviing to Market Cap calcs. I end up with the follwoing MC range
Low end range (only accounting for the first three factors and converting to CAD $ at 1.35)
380M x 1.35 x 10 = $ 5.130 B CAD $ MC (ignores factor 4 or a much higher addressable market as suggested in slide 26)
High end range (also taking inito account slide 26, and assumed higher usage in reality but still only 40% market penetration)
951M x 1.35 x 25 = $ 32.1 B CAD $ MC
Current Spectral MC = $ 83 M (That's a M not a B !)
Happy to correct any mistakes that anyone finds in the above calcs. You can do the math to convert the MC to a pe share valuation using anywhere from best case 350M shares to worst case 400M shares O/S after end-game completes (pre-any reverse splits of course)
To justify today's LOWLOWLOW valuation of $ 83M CAD, and using the low end of the range above, one sorta has to assume that the market thinks that the odds of success (for this stage 3B confirmatory trial that is exceeding expectations) is less than 2% (83M/5130M). Odd that Paradigm thinks it is over 75%. Personally I think that Paradigm is low with that estimate. But certainly under 2% is just ridiculous. Especially when you realize that even if the FDA rejected PMX, their are other assets in the fold including: iDialco, EAA rights worldwide, IP, worldwide royatly rights for SAMI's used for HP, and break up value assets like unused tax loss carryforwards.
Is it time to spread the news to US analysts that eat this sort of thing up ? And lower the go-forward cost of capital - necessary to complete the end game? And to reward the current, loyal and ever so patient shareholders with some movement towards a truer, more fair valuation pre-FDA approval ?
MM