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Affymax, Inc. (AFFY) Message Board

  • jskstocks74 jskstocks74 Jun 23, 2010 6:06 PM Flag

    This is why the stock is down 70% and not 50% or 30%

    Why is the stock down 70%? Why not 30% Why not 50%? Why hasnt it bounced? There is a good reason: The market is pricing in a 70% chance that the deal with Takeda is dead. Why?

    Becuause the phase III results threaten the entire Hematide franchise. The reason is because Hematide was looking approval for both the pre-dialysis and dyalisis patient population. That would give it an edge over the existing competitor Mircera.

    But because they had the issues in the pre-dialysis patients, their is a big threat that the FDA wont give them approval for that indication and thus they have absolutely no competitive edge in a crowded market.

    Since all Hematide demonstrated was equivalency and no additional benefits, also with some statistical risk in pre -dialysis patients, it may only get the dialysis indication and not the pre-dialysis indication. It will have to compete against Mircera for this.

    Even with approval of Hematide, they are up against Epogen, Aranesp, Procrit, NeoRecormon, and Mircera. Mircera is an especially big problem, because it is essentially the same drug (longer lasting PEGylated Epo) for the same dialysis indication. Without this, they cannot separate themselves from all the others.

    The deal with Takeda and all the milestones rest on gaining FDA approval for BOTH dialysis and pre-dialysis indications....they have to get BOTH or they lost their partner!!! Now it looks like pre-dialysis may be in danger....FDA may black box it.....without pre-dialysis Takeda doesnt have to pay all the milestone and may be able to back out of Hematide all together.

    What if they dont get approval? What if more trials are required? ithout Hematide, they have nothing else. Without Takeda, they may not have significant Hematide sales.

    About the cash:
    AFFY has about $180 million in cash after the recent milestone payment but you are forgetting about the $125 million in liabilities on the balance sheet. You cannot just value them for their cash without subtracting liabilities. When you count liabilities there is only $60MM in net cash for shareholders.

    Although Takeda has been fronting most of the bills through milestones, their are no more milestones until FDA approval so they will burn through that cash in about 3 years. PDUFA date should be about 18 monts from now, assuming they file a NDA very soon. They will burn significant cash waiting.

    Assuming approval of the dialysis indication only, we can look at Mircera sales. Mircera sales were about $300 million in 2009, so if Hematide can capture 1/3 of sales it is about $100 million which it has to share half of the profit with Takeda. Profit margin on those sales is probably about 30% so 1/2 of $100 million times 1/3= about $15 million. That is it; enough to make AFFY cash neutral.

    Current fair should be under $5. This is giving $2.50 for cash value, and $2.50 for the dialysis franchise for Hematide, risk adjusted for non-approval all together (15%), approval for the dialysis indication only (70%) or approval of both indications (15%). You will have to wait 18 months to approval, they will burn some of that cash as well, and they are screwed without immediate approval on the PDUFA.

    Hematide is in trouble on many levels....and so is AFFY. Dont fool yourself. Reasonably valued at $5....there will be no bounce for this one, folks. Slow steady drain to $5 coming.

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    • Question: where was the DSMB (or whatever it is called this time), if there were deaths during the trial? Some adverse side-effects, but deaths? Either these deaths were considered within protocol for Hematide, or determined to be not related to Hematide. Yes?

    • You people crack me up with your detailed valuation crap. How long have you been in the market and when has it ever been logical? Maser had it right earlier. These bios (especially low floaters) are so manipulated it isn't even funny. The pps will go wherever they want it to go, PERIOD!

    • Your message does not factor in the near-term opportunities.

      This article is very important, which would be worth much to AFFY.

    • You are missing the REAL reason Takeda partnership could crubmle....FDA rejected Hematide Brand name and rumor is that the phase 3 trials had multiple GCP violoations....

    • I admit my mistake. Wipe off $57 million off the liabilities. It still ends up being about $125 million net cash per my post below, which is about $5 per share.
      The point of the posts is to counterclaim the $7.50 per share cash posts. Also consider that they will burn cash for 18 months waiting for PDUFA date...the market will price that in.

    • Per the 10Q

      190M net assets + 30M royalty = 220M net assets

      127M net liabilities - 57M deffered Revenue = 70M liabilities

      Net assets = 150M/24M shares = 6.25 cash per share add on any IP from the company and you have at worse a 9 to 10 fair value.

      Please correct me here if I am wrong.

      Deferred Revenue definition:
      Revenue that a company collects for a good or service that has not been delivered or completed. Deferred revenue is often a deposit of a certain percentage of the total sale. It is kept in a separate account for the company because it may be forced to return it to the customer if the company is unable to fulfill its end of the contract. Because of this, deferred revenue is recorded as a liability on a balance sheet until the good is delivered or the service is completed. It is also called deferred income or deferred credit.

      • 1 Reply to ejtrewni
      • You numbers are correct, so is deffered revenue statements. But the subject is CASH, not assets. The assets would have to be sold to be cash. Liabilities are a strike against cash because they will have to pay those liabilites.
        So counting only cash:

        Cash and cash equivalents $68,188,000
        Short-term investments $ 68,949,000
        (recent payment from Takeda) $30,000,000
        Total cash: about $167,000,000 in liquid assets equivalent to cash
        But I will also count:
        Receivable from Takeda $13,555,000 and some other non-liquid assets like
        Restricted cash $5,469,000
        for a total of about $185 million in cash/liquid assets.

        So $185MM cash-$70MM liabilities= $125 million cash.
        $125 million/ 24 million shares= about $5 per share honest to God cash.

        There are other assets, which may or may not be worth what they say as accounting has all sorts of tricks but we are talking about just cash.

        Maybe we are splitting hairs, but I think a more realistic cash/liquidation value is closer to $5 per share than %7.50 per share.
        But like I said, all things considered, the company is worth $6-7 per share; it is no coincidence that it is hanging around $7 per share.

    • Jskstocks, you lost all credibility with that laughable "oops, I forgot about that other $60 million on their balance sheet"! As if you forgot about a little change! That $60 million you failed to include in your original valuation of $5/share, should bring YOUR valuation to $7.50 now. And now since it's clear that you're short and just spreading lies to scare the longs, I would imagine that the REAL valuation is quite a bit higher than that.

    • I agree, the final some is $120 million NET cash.
      With 25 million shares issued (per 10Q), that is about $5 per share cash.
      But also consider the cash they have to burn the next 18 months waiting for the PDUFA date....the market has a way of pricing these things in. This company will trade 20% below this cash value; so $4.
      Lets say you add $2.50 for the Hematide franchise, then you have $6.50.
      So I agree $6-$7 if fair value for AFFY.

    • "The deal with Takeda and all the milestones rest on gaining FDA approval for BOTH dialysis and pre-dialysis indications....they have to get BOTH or they lost their partner!!! "

      Do you have a link for this info? Seems very odd that Takeda would've paid the latest milestone while knowing the drug presented very little value to them.

      Also as another poster mentioned, the patient population for pre-dialysis should've been a lot bigger if that indication was the primiary goal.

    • Hmmmm, nicely written and argued however, if you were completely right that they needed the pre-dialysis patients then there would have been a sizable patient population!

      And there wasn't, these subgroups are an after thought because they are not powered to give definative answers so

      I can't agree with your analysis, just doesn't add up!

      However you at least render a plosible explanation for a huge hit in the stock!

      • 1 Reply to cardiomann2000
      • jstock- I saw you wampq board, who said WAMPQ is not worth more $6, I sold it for $80!!

        Here are the facts:

        The liability is debt under 10 MLN.

        Couple of more milestone pmts are due from Takeda, till the filing.

        Takeda would not have made the pmt had they NOT seen a fair chance of approval.

        It is not a 300 MLN mkt, it is more than a Billion. AFFY drug is once a month long lasting drug. Even if the efficacy is identical, this is a NOVEL PEPTIDE! There goes the idea "ME TOO DRUG". FDA will approve.

        The dialysis population is 3 times the non-dialysis group.

        All in all the prospect is so good, the stock will double from here! Watch for it!

        GLTA LONGS!

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