The most conservative market cap is 4 times 2016 revenue. That is $2B market cap or $33 per share.
Most biopharma companies go from 8 to 10 times revenue.
Even with calculating debt, at 4 time 2016 rev, the price is $25.
A reasonable calculation is 6 times 2016 rev or $3B then subtract debt and add cash, $2.5 B is fair value. Now add bonds to shares and put total shares at 75 M and still the price is $2.5B/75m = $33.3 per share.
Axovant IPO sparks talk of a biotech bubble.
Well, this says it all:
" A biotech company with a single unproven drug candidate and a 29-year old chief executive went public this week and already has a stock-market value of close to $3 billion, raising some concerns the sector may be in a bubble."
This fact scares some investors that punished stock like DEPO. All it needed a few people with 300k shares to damage DEPO by about 4%.
First, DEPO market cap is $1.2B. Nucynta purchased price plus purchase costs was around $1.1B. It is like to say that DEPO without Nucynta only worth $100m.
The sector should not be punished by someone who bundles all the companies in the sector as the same.
Nucynta will generate $500m rev per year if not higher for at least 7 years. At 75% margin, it generates $375m of profit per year in average. DEPO can pay off the Nucynta debt in less than 2 years and then enjoy huge profit for many years to come.
After all, DEPO has 4 more drugs that are generating good profit.
Having 6 drugs in the market is not the same as a company with one unproved drug in phase 1 that trades 3 times DEPO.
Sentiment: Strong Buy
Since the last big drop, DEPO held fine ( 20 trading days) and inched up from low $20 to current prices around mid and high $21.
Investors thinks that the current prices are bargain and price will go higher. The reason is that DEPO held very well in spite of market volatilities while volume have been above average. Institutions and investors added to their positions since DEPO traded mostly positive during this time frame.
However, this is beginning for DEPO to fill the gap first, go to its previous high second, and then record new highs third. It may happen this year or by early next year but DEPO will be between $30 to $40 if not higher.
DEPO is down with low volume in a red market. Probably too much reaction and this has created to add more shares.
DEPO value does not change and time is in favor of the stock.
Nucynta will rock eventually. $60m to $65m per quarter is easy for Nucynta. However, the rev will rise significantly in 2016 and average to $100m/Q for Nucynta.
I think some short sellers are taking advantage of low volume and they have pushed it this low with only few hundred thousand shares. Good opportunity to get the shares this low.
Well, the following are my revenue calculation for DEPO. I anyone asks, I put the details but the summery is
Q1 = $32.2m, already reported and it is not included any PDL royalty that misled some investors.
Q2 = $90m
Q3 = $102m
Q4 = $109m
Total for the year = $334m
For 2016, the average revenue per quarter will be $120m to $125m however, DEPO will do at least one more acquisition or deal which will add $20 to $50m revenue. So, one way or another, 2016 revenue will be above $500m.
At an average 5 times revenue, assuming 2016 revenue of $500, the market cap will be $2.5B and PPS of $41.
I tell why DEPO logic is an excellent move.
Lets look at minimum income from Nucynta in one of 2015 quarter.
Nucynta generated $44m revenue in Q1 2015 and was assume the worst case scenario that 275 reps did not do better than JNJ marketing team and the same number of prescription were filled.
With the same prescription number as Q1 and with 44% price increase, the revenue for a quarter will be will be $63.36.
Now if cost of revenue plus loyalties are calculated at high percentage of 25% then the net income of Nucynta for the quarter will be $47.5m. If in a quarter, DEPO pays $3m extra for new reps and $15m more for interest then it will have $29.5m of profit.
Not a bad deal at all. You have to spend money to earn money.
Now, Nucynta average revenue per quarter will $100m in 2016 but interest and marketing stay almost the same while margin will go up significantly.
Run the same numbers for $100m rev per quarter:
25% for cost of revenue or $25m.
$15m cost of interest per quarter.
$4m cost of new reps and marketing per quarter ( assume each is paid at $120k per year) .
Total cost per quarter in 2016 based on $100m rev is $44m.
Net profit will be $56m per quarter in 2016 just from Nucynta.
it is an excellent deal and this extra money will either pay off debt or acquires new drugs and income will go higher in either case. That is why DEPO is a growth company.
Good timing. When opportunity knocks, don't pass it. Today is first day and it will continue the trend for many more days.
While Nucynta IR in US has only 0.3% of the market.
However, most parties from FDA to others are pushing for a safer and less abuse drug.
This is where Nucynta comes to picture.
Doctors should go for Nucynta more than other painkillers. They more happy patients with less lawsuits.
And happy DEPOers (investors, employees, patients...) and whoever deals with DEPO directly or indirectly.
Exciting future is ahead of DEPO with Nucynta sales in full swing starting July and Q3 2015.
Now Q1 which had accounting changes and Q2 with non-recurring expenses are behind us. With strong cash flow, DEPO is panning its next acquisition. Strong cash flow becomes the engine of the DEPO growth. At minimum, the accumulated cash can reduce the debt and increase the income but using the cash for another small acquisition in range of $100m to $200 in 2016 is the best use of the cash.
I think Spectrum follows chart more than an average stock in spite of your manipulation theory.
The most important point is that most day traders, manipulators, investors, etc.. use charts for their daily actions. Knowing this fact, Spectrum fairly follows charts and indicators.
On the other hand, when some people use charts for their trading/investment (may be majority) then the stock is forced to follow charts. If you don't understand charts then just do your old style. Heck don't use internet and relay on newspaper for your trading.
"They said that they are not seeking a buyer"
That is the most silly statement I read.
Have you ever heard a company announces that it is seeking a buyer publically unless the company is about to go BK?
RAX is a company with young sharp management that is inventing and growing while it is conservative financially. It is not a company to put a tons of debt in the books to get revenue and growth.
In other news from the summit, Ansible, a startup backing a hot configuration management tool that makes it easy for businesses to get the underlying cloud infrastructure ready to host software, launched the Simple OpenStack Initiative, backed by Cisco, CSC, HP, and Rackspace. Difficulty of rolling out and managing multiple OpenStack components is another stumbling block for would-be customers so if this effort can make progress here, more power to it.
1- RAX is cash positive. CTL has $20.5 B debt and only $150m cash.
2- RAX is growing and revenue goes up quarter after quarter
3- RAX reports net (GAAP) instead of NON-GAAP. So, GAAP income is real.
4- RAX market cap is less than 3 time its revenue.
5- Finally, RAX will not stay at current prices and it will go much higher in future.
1- Cash positive
2- Trading at 3 times rev
3- Positive and increasing cash flow
4- Growth stock in a hot sector
5- Innovating new technology
6- To announce partnership with AMZN and others this year
7- Adding revenue every quarter
8- Potential target for acquisition