Speculative math using Thursday's news...SQI has stated that Antibody testing will be a $ 3B USD opportunity (in NA)
They MAY very well now be one of the first to market, but in any event they will be hard to beat (by any possible competitors) from an accuracy perspective (given a head start based on Lung transplant science that has been perfected over20 years)
Lets make some guesses as to annualized revenues (run rates after 1 year of getting going with Azova's huge kickstart campaign). Likely there will be other distributors jumping on board as well...so the marketing effort won't all fall on Azova
Assumptions:
- US population 330 M
- Net back to SQI on a per kit basis (after Distributor discount) $ 50/kit
- Margins 80% (after lab fees, freight expenses,etc)
- EBITDA 80% of that.
Lets calculate Revenues and EBITA on the following penetrations/kit sales (run rate after 1 year):
1. Low acceptance. 1/4 of 1 % (=.0025) market penetration
2. Good acceptance. 1% market penetration
3. Very Good acceptance. 5% market penetration (remembering that this doesn't necessarily mean one test for up to 5 % of the population. Organizations (e.g schoolds, sports teams, front line businesses, etc.) that addopt CV-19 Antibody tests may require 2, 3 or 4 tests per individual per year)
Case 1. 1/4 of 1 % population penetration.
Based on above assumptions -
330M X.0025 x50 = $ 41,250,000 USD
Margin = 80% of $ 41.5M = $ 33M USD
EBITDA = 80% of $ 33M = $ 26.4M or $ 33M CAD
EBITDA multiple say 10 (low for an FDA approved Biotech)
10 X $ 33M = 330M = est. MC
Shares o/s say 500M
SP = .66 (330M/500M)
Case 2. 1% population pentration
essentially above X 4 so
SP est. = $ 2.64 Note Revenues for Case 2 would be = $41.25M x4 = $ 165M = 5.5% of $ 3B market (SQI est.). 5% of NA as a whole (Can and US). Reasonable for a first to market product with high level of accuracy?
Case 3 (5% penetration, or more likely would manifest as 1-2% acceptance with multiple uses/person by some orgnaizations on behalf of their members, employees, students, etc. throughout the year)
essentially Case 2 X 5 so
SP est.= $ 13.20 Remember this only discusses the Covid Antibody test, not the other components of the business. And what about the possibility of worldwide licensing?
Wondering where the financing is coming from?
- Azova does heavy marketing lifting, consumer data base, web front end, customer gathering
- CLIA labs and Toronto labs in place
- more warrant exercising to come (when sp move upwards)
- 80% margins on millions in sales
- once profitable, no income taxes for years based on tax loss carryforwards
Please critique.
AIMHO based on best guess assumptions, until more details are revealed in the coming months.
MM