Hey guys, I made a thread with this exact post about a year ago, but it won't let me link on this new MB, so I'm copying and pasting. I think it's important we once again take into consideration our market population and potential for it. So, when people are talking about that 2 billion dollar industry, are you guys taking into consideration 2 billion in revenue, or stock market cap? Because, with these numbers, 2 billion is very unrealistic for revenue.
For my figures, I used a current population sample of 20,000 people in the US known to have the condition (myelofibrosis). That Yale study linked said 1.46 in every 100,000, which meant roughly 30,000 SHOULD have it in the US.
I used 20,000, and a pricing of $17,000 a year as a supposed price tag for the treatment (comparable to other existing JAK treatments like with Pfizer). Since a few of YMIs numbers revolved around a 9 month period (28 day cycles for 9 cycles), I averaged the remainder to be a few thousand, which I believe gave a latter price tag of about $14,250 for YMIs CYT387 treatment (obviously this would be the most inaccurate number). From other companies, it seemed like margin per customer on existing drugs ranged from 5% to 30%. I used 10% because it seemed frequent for companies, not to make up for drug cost, but also salary, etc. After researching penetration rates, I saw 20% on average for first year new drugs, and 50-60% "or more" by third year for new drugs. Since Incyte's drug is coming first, I used 55%.
So, to simplify....
20,000 people * 20% penetration rate = 4000 subjects. Annual Margin Per Customer of 10% for a cost of $14,250 is roughly $1425. So 4000 subjects * $1425 is $5,700,000.
Using a penetration rate of 55%, gets us $15,565,000.
To finish the equation for continuation of the drug while getting new clients, using 1/(1+.12-.88) (.12 year rate growth with .88 as retention rate, currently existing figure for YM trials), gets us $23,750,000 for first year at 20% penetration, and roughly $65,000,000 for third year.
Even with a cost of 80k, the amount still comes out to under 400 million.
So my question is, where are the 2 billion dollar figures coming from? It must be market cap, or consideration of CYT387 expansion in several countries. I am not sure what the myelofibrosis numbers are in Canada, but I can't imagine that for 30 million people, the numbers would bump the above equation to 2 billion.
Frankly, people want these $4 a share figures etc but it doesn't yet make sense, the drug should at least be on the shelves before then, and even so, we are in a niche market. We can look at other indications of the JAK inhibitor, but no one seems to ever bring up the process and costs of developing this inhibitor in another indication.
If I made a mistake on the above equation I apologize, all criticism appreciated.
I thought I posted a long reply but it seemed to have disappeared in etherland. Anyway, 2B target may not be off with the reasons you gave, i.e., expansion in other countries (BRICS) and other indications like arthritis, other immune disorders, and solid tumors.
I sold all my longs, waiting for the end of Dec for the short ones to become long, and next year for the remaining ones since I don't have an immediate desire to buy other stocks with the cliff, except those that are getting oversold bec of the cliff ,or because there are stock offerings like in the case of LPTN. I like LPath as a long term hold bec of impressive AMD results. I'm also hoping for a higher bid for YMI which would be at least 30c more.
Thanks for all the technical analysis, Shirazy. Oh, look at ARRY, too. Impressive pipeline and partners. Another 2-3yr hold. NPSP, too. I have TTNP waiting for a partner and priority review from FDA. And many more biotechs! SGMO has a disruptive technology - it will be a while before they get a drug commercialized but the technology is already widely used.
who cares at this point - YMI is being taken out? further, there are several related indications being considered for both cyt387 and jakafi, including polycythemia vera and even pancreatic cancer - myelofibrosis is just an entry indication. yes, there is a cost to pursue other indications - always is - but that's the cost of doing business.
JJ, you of all people, I'm very surprised would have that response. Proper DD in biotech is very important, and frankly, I'm not doing this to really reflect on recent acquisitions. My points are, as of CYT use for myelofibrosis alone, the billion dollar figures people are quoting are not realistic. Therefore, even with this buyout, the drug doesn't have a crazy amount to grow until they use it for other purposes (in terms of stock equity). I think YMI could use an expansion not into other indications, but other markets. I'd like to know that, with this acquisition, what markets YMI will begin to cover before release of the drug, etc.
2B is realistic given your other scenarios of sales in other countries, including Europe and BRICS, and other indications. Doctors might also be comfortable already of JAK inhibitor class because of Jakafi. Developing 387 for other indications would be cheaper, I think, because you can jump into an sNDA right away - maybe directly to a ph3. Not sure about that.
I could use an extra 30c per share and I can wait as long as I don't have any other great stocks to buy. Right now, I'm worried about the cliff panic, so I'm in no great mood to buy other stocks with YMI proceeds, unless they are pushed down for no good reason, like end of year tax loss selling, or the cliff panic itself. Or in the case of LPTN, because they have a stock offering at a 20% discount and I happen to like their AMD drug and technology. That would be a rough and long hold though, just like YMI. I also have more shares that will become long term holds if I wait til Dec ends. Who knows, the capital gains might stay at 15% next year.
Thanks for your technical analysis Shirazy, and let us know what other biotechs you'll be analyzing on boards.