April 29th is quickly approaching for the FDA to review the CRL for the sNDA of FUSILEV for the treatment of advanced metastatic colorectal cancer. See below link:
The CRL was originally issued during Oct 2009 knocking the stock down from $9 to a low of approx $4 after the dust settled. The stock has begun to break out to new highs in anticipation of the approval of FUSILEV. Other products in their pipeline:
The chart looks beautiful so far and I am very excited about playing this. I will be waiting to buy on a dip back down to around 6.15-6.25. I would anticipate that this time around the chance of approval should be high so we could see a run back up to $9. The market cap is pretty low at 330k and cash and securities were 86M as of 9/30/10 so they should not need to issue additional securities for quite some time.
A quick calculation of value of SPPI
Number of people in the U.S. diagnosed with colorectal cancer in 2007 as per article below was 153k.. Usually I would factor in an increase based on increase in population, but for these purposes lets just use the 153k.
Lets say year 1 SPPI penetrates a conservative 5% of the market. 5% of 153k would be 7,650 patients. Assuming a $40k per year per patient would yield $306,000,000. In some cases, a cancer drug can run up to $100,000 per year depending on its status. For this example, IMO 40k is conservative. Assuming yet another 75% haircut for cost of goods and selling expenses would yield 76M in income before taxes. 40% taxes gets you 45.9M net income or at current outstanding shares eps of $0.90 and at the current share price of 6.65 a pe of 7.38.
In year 2 if we are able to raise that penetration to 10% we can double year 1, but even still make half a billion even if the company trims the price tag for the drug a little. Assuming 70% for cogs and selling expenses and the same 40% net income, you get a net income of 90M or eps of $1.78 and a pe of 3.74.
To measure pps at time of approval lets figure an average pe between 12-16. Based on the above analysis, we should see a share price between $10.81 and $14.41 during the first year after approval. After approval depending on the variables above could be “sky’s the limit”.
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Disclosure: Long SPPI
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