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Author: norman1066 Three stars, 500 posts Old School Fool CAPS All Star Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 291  
Subject: Is StaphVax a blockbuster? Date: 1/21/2004 9:54 PM
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Hi all,

I am very much the novice at evaluating biotech but I've taken a crack at valuing StaphVax (assuming, of course, it is approved for sale).

Not sure where I read it (maybe at Nabi's website) but the market for end stage renal failure is pretty small, even if that population requires a booster shot every 8 months. Something like 45,000 new patients per year and a total of 85,000 in the US. Assuming EU has a comparable # of dialysis patients and the drug sells for $100 per shot that is just $255,000. Hardly worth the tens (hundreds) of millions invested in the development effort.

Obviously the big profits would come from the much larger surgical, trauma & burn, neonatal, immune compromised populations which Nabi is estimating at 12 million in the USA. Again assuming the EU has a comparable size market and the shot is $100 (and again assuming 100% of population receives the shot) then revenues from StaphVax could be $2.4 billion.

Questions:

1. Am I about right in these market sizes?
2. What kind of sales force does Nabi have, or are they going to have to partner with a big Pharma?
3. What kind of net margin could we expect from the StaphVax product?
4. What percentage of the target market will be eligible for StaphVax and how many would already have received it because of prior hospitalizations?
5. Does anyone know when StaphVax would go off patent? I see they have some patents that issued in 1999 and 2003.


Any insights would be much appreciated!

I ran a net present value calculation using a introduction date of 2005 for EU (about 100,000 shots in first year) with US coming on-line the following year and number of shots growing over 10 year period to represent 20% of the target market. I assumed a 30% net margin. I did grow the patient population by 2% per year and the drug price by 4% per year also. I then assumed that the number of shots declines by 50% when the drug comes off patent in 2025.

Using a 15% discount rate I get a NPV of Approx. $700 million for StaphVax. Add this to the $890 million that values current cash flow at 17x (according to MF "snapshot") and you get a market cap of nearly $1.6 billion or 80% above current valuation. The ultimate market penetration and the rate of growth to that market size are key drivers to the valuation. I'll try to post the data table if I can figure out how to do that.

Thanks for any input

Regards,

Tim
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