I like to overlay the ARNA chart on top of mnkd most of all because I like to think of 500-700 % gains from here. But, I don't know quite how to compare a potential blockbuster, and with whome.
Rad, do a google search and reach the article USING DCF IN BIOTECH VALUATION as a starting point. You can learn to do what you are asking, but you do have to do some research. One of the things I have learned in my research, is biotechs that get approval of blockbuster drugs that have an extremely large customer base are OFTEN limited in initial sales growth by the time it takes to build out production facilities. In otherwords mkt demand exceeds available supply. I personally think this will be the constraint that MNKD is going to end up facing during the first 2-5 years after receiving approval. Therefore in my own analysis, I have estimated future sales and cash flow based upon how fast I believe MNKD can build out production.
Good point. If demand outstrips supply, what happens to the price of the drug? The quick response would be "it goes up" and creates more revenue. But eventually that could have a negative impact in the cost to the user, reimbursement and competition. As mentioned in the last conference call, it's a problem the company is looking forward to. Easy to say...
If this is a true blockbuster, the market won't price it in until sales come in. But most here seem to be expecting $5-7 pre-trial results, $7-10 post trial results, and $12-20 post approval, and a buyout anywhere from $20 to infinity. I believe the best case scenario only taking into account Afrezza, many years down the road, MNKD has 8billion in annual sales and trades at 5x revenue, giving a market cap of 40billion and a share price of 100.
Phoqoo is totally wrong here and it just takes a little bit of research on the web to validate that. DCF (e.g. discount cash flow) is the most common way utilized by major hedge funds and mutual funds to value a biotech company without current sales. That is why you always have multiple companies that are in the pharmacertical industry classification with exceedingly high PEs. For example: VPHM with 310 PE, GENT with 127 PE, ACT with 127 PE, HSP with 118 PE, LFVN with 57 PE, FRX with 88 PE, ALXN with 77 PE, PCYC with 67 PE as well biotechs that currently show negative EPS yet have exceptionally high market capitalizations.
The DCF valuation method is based upon the projected 10 year future cash flow, discounted back to the present, and adjusted for risk. Those wishing to read about DCF might start by doing a google search and read the article USING DCF IN BIOTECH VALUATION. There are other articles on the web on this subject as well.
Simply reviewing historical PPS valuations of other biotech stocks that have rcvd drug approval but did not yet have established sales would also validate that the market DOES price in future sales based upon projections. It is the skill in accurately projecting future cash flow and risk that enables some investors to be more successful than others.
I figured about $8 Billion in sales in about 5 years. My problem, and believe me it's a great problem to have, is the Jan 2014 calls I've been accumulating will need to be converted to shares to meet my 5 year goal. I need to know when to do it. You know, trying to find order in chaos.