If the company acquires 750 new patients per month at an annual revenue level of $36,000 per year, and the patients complete an 18 month course of treatment SVNT will reach an annual revenue run rate of $281.25 million.
We should keep in mind that the company is likely to set the initial price for the treatment VERY high for the simple reason that DRUG PRICES NEVER GO UP, THEY ONLY GO DOWN. Thus, the cumulative revenues will be maximized by the highest price, it seems.
If I haircut revenue by ~10% to an annual revenue run rate of $250 million, apply a 75% gross margin to account for manufacturing and royalties, subtract $60 million for SG&A expenses and apply a 37.5% tax rate, I get net income of ~$80 million, or about $1.15 per share.
At $1.15/share you'd have to throw a multiple of 20 at it IMO.
ReplyDeleteOn a different note I just found the folowing (on Cafe Pharma).
What's wrong with this picture? The guy who is Head of Global Marketing & Product Planning is looking elsewhere it seems.
http://www.linkedin.com/pub/stephen-glockenmeier/2/248/304
I don;t think a listing on LinkedIn is necessarily "looking for another job."
ReplyDeleteIn an era of corporate disloyalty to employees, it is a necessary personal networking and promotion tool.
I put it out there since his main line stated "Currently Seeking My Next Challenging Role".
ReplyDeleteI missed that........
ReplyDeleteTraderJay,
ReplyDeleteActually, wholesale drug prices often can and do go up annually. Recent example include Lipitor, Norvasc, and Ambien (when the last two were generic). These rises can exceed 10% annually for successful medications. I wouldn't be able to guess what happens to successful drugs with a much smaller patient population.
What is the relationship between the announced drug price and actual reimbursement by the payors? Do they typically pay the list price or do they each negotiate their own deal?
ReplyDeleteNobody pays list price. CMS will negotiate for Medicare, Medicaid and VA. Major providers will negotiate for themselves. Other providers will still get a discount off list price. Major providers such as pharmacy benefit managers (express scripts, nexus, etc.) will get big discounts to provide drug to the health care plans they administer.
ReplyDeleteThis indeed argues for a very high "sticker price" but the "effeective selling price" is still impossible to calculate even after we know the "list price."
ReplyDeleteI think mbusser threw out $2K or $3K per infusion. So that's $4K or $6K per month, or $48K to $72K per year. $72K sounds awfully high. So if we go with the $2K then what's the expected net to SVNT? I've seen approved amounts all over the map .. things like routine blookwork for physicals reimbursed at maybe 20% to surgical procedures at 80% to 90%. I'd assume since this is the only game in town for TFG that the reimbursement rate would be fairly high.
ReplyDeleteI'm still struggling as to why they couldn't negotiate a buyout with a modest up front payment (for FDA approval). Then a 2nd small payment for when EU app is filed. Another payment when EU approval happens. Subsequent payments for hitting certain sales targets (as was set up with Euflexxa). That kind of approach would seem to protect the buyer in case sales disappoint yet it gets SVNT shareholders more than what the stock is worth today (I'm assuming that they could get $1 billion for the FDA approval alone, which is just about $15). Almost tempted to fax this to them but surely Lazard and JPM would most likely have looked at a lot of options.
maybe I'll send the blog address to Katherine Xu or a couple of the other analysts via my Bloomberg on Monday. LOL.
ReplyDelete