Back to the future...PLI price target published next yearI had one more read at Doug Cooper’s report a few days ago. The one that was published in the beginning of last april where Beacon raised his price target to 7 $. I’m sure everybody did read it but in case you didn’t, here is the link :
https://personal.crocodoc.com/xf3Gj6r
By using his own methodology (which is also similar to what fdesloges judiciously uses) , let’s try to estimate where could be their price target in one year from now…meaning the price target published in may 2016.
Assuming like he did a 1 millions litres of capacity for 2017 (PLI should announce soon additional capacity of around 400 000 litres, that will be available in 2017) and at least 2 more proteins to the 5 already known, even by being conservative we get to at least 3000 $ / L by 2020. Note that Cooper used 2200 $ this year last month.
By this time next year, plasminogen should be approved and that will probably be the milestone we need for the market to realize the PPPS is for real. Once we get this, analysts will have to use a more reasonable discount for the whole PPPS platform. Cooper used 80 % in his calculation...it could be lowered to 60 %. And assuming the same margin he used of 70 % on such sales, we obtain the following annual profit :
1 million Litres x 3000 / L x 0.4 x 0.7 = 840 000 000 $
Applying a conservative 15x multiple (Cooper used only 12x) for 600 millions of shares, we get a SP of 21 $.
Now for the therapeutic division (Beacon gives only 1 $ for this recognizing the greater potential but also the greater risk at this moment). By that time next year phase 2 results could be available and if positive I suppose analysts will have to put real significant numbers for PBI-4050. Assuming royalties of 20 % for annual sales of 5 billions in 2020-2022 (and like may posters have said here, market sales of PBI-4050 could be even bigger if CKD/ DKD indication succeed) and a discount of 60 % (I suppose it could be seen as optimistic but with strongly positive results, it might not), we have :
0.2 x 5 billions x 0.4 = 400 000 000 $
Of course here the margin is close to 100 % (royalties vs production cost) but still by using a conservative 15x multiple we obtain a SP of 10 $.
For a total SP of 31 $. And if you consider the US change rate, the price target could be increased by 15-20 %, or a price target of
36 CAN $ (for 2017).
Of course it doesn’t mean the share price will get there by may 2017 but sooner than later this could be our price target. Time will tell.
A great week to all,
M80