Valuation based on Presentation to Bloom & Burton June 18thDr. Berendt's "non-confidential" presentation says on page 23:
- Potential for peak gross US sales up to $200M
- Assuming maximum of 50% market penetration
- Comparable market opportunity ex-US
So
maximum potential annual sales are: $400m in US at 100% market share plus $400m in the rest of the world. Total global potential = $800m annual gross revenue. So let's deduct $100m for costs and expenses (how much does it cost to replicate a microbe found naturally in the soil?). So net profit before tax is $700m. Assume a corporate tax rate of about 30%. That leaves after-tax profit of $490m annually. Based on BNC's current share count of about 160m shares after exercise of the 40 cent warrants, then EPS = $3.06/share. Assuming a conservative P/E multiple of 10 (right now, trailing P/E for S&P500 is around 18), then
BNC would be valued at $30 per share. Ah, but you say there is risk, so it is only worth 18 cents per share. OK. I will take you back to a concept I learned in business school called Expected Value. If you have a risky situation, then [(the probability of success) x (the gain)] + [(the probability of failure) x (the loss)] = net expected value. If the net expected value is > 0 then it is a fair bet and you would invest.
All you math majors can solve the expected value equation with the unknown variable being the probability of success. You will see that
the market at 18 cents is currently assuming a probability of success of 6%. Since we already have a clinical trial in the bag which shows 2x better results than the only approved competitor (see page 20 in the presentation) then the market is assuming too low a probability of success. The stock price is too low at 18 cents.
Here is the expected value equation to solve for: Let X represent the probability of success. Then we have 3.00X - 0.18(1-X) = 0. Solving for X gives you 6%. As long as the probability of success is greater than 6% then it is a fair bet at 18 cents per share.
Did anyone go to the Bloom & Burton conference? Did Berendt also show a "confidential" version of the presentation? What did it say?