This a first in a series to stimulate discussion about ADXS BO price.First let's look at the market for ADXS first platform,( HPV related cancers. (Note: there are four total platforms, so we're only considering a quarter of their total IP here).
1. How many people are we talking about? 39,844 new HPV associated cancers are diagnosed every year, according to the CDC.
2. Market share assumption now assume that (low end) 10% of these cases are treated with ADXS LM related therapy, that comes to 3,984 cases per year IN THE US. So, if you assume a cost of $50,000 per treatment, that comes to about $200m in the US. now consider
3. Now add in Europe and Japan
- Europe has a total Population of 508m people; and
- Japan with a population of 127 people,
- The additional amount for EUROPE AND JAPAN = 7,938 X $50,000 = $396,000,000
So, the TOTAL for US ($200m) plus Europe and Japan ($396m) is around $600m revenues per year, treating 10% of the total HPV related cancer population diagnosed IN ONE YEAR (and not counting those that are still being treated that were diagnosed in previous years).
5. Magic wand reduction: Now a waive a magic wand to account for the fact there will be a substantial price discount in Europe, say 50%. That will reduce total annual revenue in US, EUROPE and JAPAN to around $437m (will give you spreadsheet later).
6. REVENUE PUNCH LINE:
Projected revenue for ONE FRANCHISE assuming 10% of treatable population is $437m.
7. From Revenue to Market Cap: Expected Value based on probability of approval
Now assume a 50% probability the will be approved - to calculate the "expected value" of an event you just take
(Value of event) X (Probability of event) = Expected value
for HPV Platform that translates as follows
($437m) X (0.50) = $218m Annual Revenue
8. Moving to Price/Revenue estimate:
Previously cited research suggests a P/R ratio of 6, which suggests market cap is...
$218m X 6 = $1.3b
9. And finally to buy out PPS: Now take 49m fully diluted shares to get share price at BO, or
$1.3b / 49m = 26
PUNCH LINE: If you assume 50% likelihood of success for LM Therapy in HPV related cancers, and that 10% of the total ANNUAL patient population for a year (not including patients from previous years), you get a Buy out value of $26 FOR THIS ONE FRANCHISE - of FOUR. f