50,000 ntm + 35,000 cf + 30,000 cf = 115,000 patients x 25% = 30,000 x $35,000 = $1,050,000,000 /3 = $ 350,000,000 x 12.3 = $ 4,035,000,000 / 33 mio shares = $130 per share!
Sentiment: Strong Buy
OK - your valuation is based upon 12.3 times earnings, and earnings are assumed to be one-third of revenue.
Your valuation of $130 a share assumes that Arikace will be used by the following patient populations -
25% of 30,000 patients in the US with CF
25% of 50,000 patients in the US with NTM
0% of 250,000 patients in the US with Non-CF Bronchiectasis
25% of 35,000 patients in Europe with CF
0% of ? patients in Europe with NTM
0% of ? patients in Europe with Non-CF Bronchiectasis
0% of ? patients elsewhere in the World with CF
0% of ? patients elsewhere in the World with NTM
0% of ? patients elsewhere in the World with Non-CF Bronchiectasis
Why the assumption that only 25% will use Arikace in some cases, and 0% will use Arikace in the other cases?
And let's not lose sight of the fact that the valuation does not reflect the additional use of Arikace as an emergency therapy.
1. From the Non-CF Bronchiectasis FDA-sponsored workshop last year -
"In the unit, in the hospital, we frequently double coverage people with pseudomonal pneumonia, for example, or gram-negative pneumonia, or just empirically before we know what anything is. And a patient with a ventilator-associated pneumonia, or just a rip-roaring severe pseudomonal pneumonia, often gets two drugs of a different class"
"There's a lot more adverse events when you use two drugs versus one. I think in the end, probably you should use two drugs if someone's really sick, because it improves the chances that you're going to actually have one of them working"
2. From the article "GAIN Act, FDA stance only first steps to refilling antibiotic pipeline in U.S." -
Jeffrey Stein, president and CEO of Trius Therapeutics Inc., told BioCentury the industry appreciates FDA's flexibility on prior antibiotic use for pneumonia trials - but it does not go far enough.
"The initial guidance specified no prior antibiotics allowed, and at the same time it required that these be very severe lung infections," Stein said. "These are mutually exclusive criteria. A patient admitted to hospital with severe lung infection automatically gets a drug."
If I'm understanding this correctly, a patient seriously ill with pneumonia is immediately given an antibiotic, or even two antibiotics - at a stage where the actual infection has yet to be identified (aka empiric therapy).
From what I've read the default antibiotic is currently either a beta-lactam antibiotic such as penicillin or amoxicillin, or a macrolide such as Zithromax. Z-Pak is a tablet form of the latter. It seems that US physicians favour a macrolide therapy because they see more cases of pneumonia caused by beta-lactam-resistant pathogens such as MRSA and Haemophilus influenzae.
But surely a wide-spectrum antibiotic such as amikacin would be a better bet as an empiric therapy, if it could be administered without the danger of causing kidney or ear damage? And isn't the primary aim of an emergency therapy is to control the infection as quickly as possible?
Wouldn't Arikace be far more suitable as an empiric therapy for a patient seriously ill with pneumonia than any antibiotic delivered via the bloodstream?