considering acl, page-10

Hey Jessie, sorry a long post here and done quickly as had a dinner, fire away with the Q's though.

This is a skittish post but puts forth some things to think about I guess. A culmination of many things but please don't take any of it as advice or to be true and or correct, you must check everything and seek advice from a professional, lol:)

Firstly, I saw SSkim mention that he thinks this is a lower risk investment and I tend to agree. The reason being is the nature of what we are dealing with as far as the ANDA application for Generic Fonda is concerned, it's not a simple yes or no scenario, we have a buffer as Pete Smith put it in an announcement called The CEO Transcript:

#####

The CEO Transcript: Can you tell investors how the Abbreviated New Drug
Application (ANDA) submitted to the FDA in March 2009 for fondaparinux is
progressing?
Dr Pete Smith: Well, in many respects the ANDA process is less opaque than a new drug
application where it is all down to a final committee decision. An ANDA approval is more
like a checklist of items that have to be finalized before approval can be granted. Think of it
as being like a test where if you fail the first time you can re-sit the exam again and again
until you pass.

#####

So in saying that we finally heard in the last week that the final inspection we were waiting for has been done, this is from the latest presentation:

#####

All sections have been reviewed
Chemistry, Manufacturing and Controls (CMC)
Labeling
Microbiology
Bioequivalence
Other (Packaging, Device)
Awaiting approval from FDA
Pre-approval inspection of fill-finisher complete
Part of routine inspection
CMO currently FDA approved

#####

Now I'll rehash some figures I worked out for myself, just for me, nobody else. Note also these are just for US sales and as soon as we get approval, EU sales aren't included which will start late 2012/early 2013 (patent expires 2012 and Reddy's are ready) and these figures also offer no value to the pipeline as mentioned below, although I will elaborate after. I have updated some figures from before to reflect the now.

As has been reported before (Bioshares) Reddy's have already lined up the top 10 purchasing groups for Fonda in the US and are ready to go.

US sales, things included:

1. Using $8m current cash burn rate. Increased of course as we progress the phase 3 trials of HA-irinotecan, the $15m raised will take care of most of this.

2. Just the one scenario showing $US earnings, considering we are on par or near by.

My personal calcs only:

Total yearly sales of Arixtra in the USA was around US$266m for last 12 months earnings, Q4 09 - Q3 10, the next figures are very soon for Q4 10.. ACL will be able to access these full sales as soon as/if FDA approval is given. If we use 50% market share (I expect more like 60% over time, reports show up to 70% as post below), this equals US$133m yearly sales for Dr Reddy's, take off 15% to allow for reduced generic pricing (it may be less than this) and this equals US$113m.

Now using 192m shares on offer, 6m oppies not yet in the money, some go up to $1.72 odd.

US$113m (35% of total sales = ACL profit) x 35% = US$39.55m. Take out $8m cash burn p/a and 15% tax rate (because we will have many years of expense claims, approx $80m) gives you US$26.81m profit or US14c eps.

Now, I am going to use PE's of 10x, 15x, 20x and 25X, I reckon that once sales are flowing we would be fluctuation around at least the 15x and only around the 10x when the markets are weak overall, so much more to come with the points below to keep us in the upper range.

Choosing your own PE:

$US

14c x 10 PE = $1.40 (bearish PE that factors no growth and maybe even neg earnings)
14c x 15 PE = $2.10 (flat growth projected, steady as she goes)
14c x 20 PE = $2.80 (growth projected in the particular drug selling, aka Fonda)
14c x 25 PE = $3.50 (Fonda growth projected and pipeline being looked at, though EU sales would increase this)


* PLEASE NOTE - these PE multiples used will fluctuate depending on what the company is up to, they can be affected by:

1. Oral Fondaparinux, could be a market in the $5-6Bn range if they (oral anticoagulants) break into the atrial fibrillation market as well as the out-patient DVT prevention market, though this would take time and patients would have to switch. Still, this is a huge market even if they (oral antis) crack 1/4 of the potential.

2. HA-irinotecan, phase 3 trials will start as soon as FDA is given for our Generic, nearly all companies in phase 3 trials are ascribed some value given they have made it thus far.

3. The absolute rapid growth that Arixtra has been seeing year on year in sales, reported at 40% odd for the last year alone.

4. Additional indications that Arixtra may be accepted for, as per the Oasis 8 trials that seemed to come out as very positive.

5. Competition (albeit probably 3 years or more away, imo). Smoke screen imo as they haven't even filed an ANDA and wont be able to manufacture at scale going by their DMF.

6. HyACT sales and or collaborations that were announced recently.


** Please note that the above doesn't include the European market that is worth over $150m and could add anywhere from 80c - $1.50 to the above pricings especially considering ROW, from late next year on!!



THEN, we could start to think about HA-irinotecan, actually we would be thinking of this at the same time that we would be entering Europe and probably before any competition ever entered in the Fonda picture considering the phase 3 trial will only take about 18 months.

From BioShares:

"For less than $20m (we now know $25m) ACL can complete phase 3 trials for HA-irintecan. There are also many existing oncology drugs that could be combined with HA for improved performance, if they are water soluble,including carboplatin, cisplatin, Erbitux,5-FU, doxorubicin"

As you know I'm only using the $300 - $500m revenue because it was said by the company in that Bioshares report. A while back I asked about what sort of deal would/could be done and was told they could do anything, from a large upfront payment and then revenue sharing or the company could look at going it alone, we would have Fonda earnings rolling in.

So just to be conservative and try and punch out a number I had it if ACL were to strike up a similar deal to what they have with Reddys, but for this type of deal, then we could be looking at a rather large up front payment ($??) and lets say to be cheap 20% of total sales as profit, that could be:

$60m profit for revenues of $300m = 31.5c eps

31.5c x 10 PE = $3.10 to be added to Fonda earnings
31.5c x 15 PE = $4.72 to be added to Fonda earnings
31.5c x 20 PE = $6.30 to be added to Fonda earnings

$100m profit for revenues of $500m = 52.6c eps

52.6c x 10 PE = $5.26 to be added to Fonda earnings
52.6c x 15 PE = $7.89 to be added to Fonda earnings
52.6c x 20 PE = $10.52 to be added to Fonda earnings


We would be adding these sort of prices to the Fonda earnings for both US and Europe, not to mention Oral Fonda as a possible mass money maker in its own right and the growth of Fonda also!! It's not hard to get carried away when trying to value this, stay conservative and still be highly excited as to the potential. Obviously all things must be considered and go right for the company/shareholders, not to mention the markets as a whole not imploding, although this is a good sector to hide in and generics would certainly benefit in harsh times.

PLEASE PLEASE check all figures and don't by any means take this as advice and or to be correct, double check everything and take care:)


Where the figures came from.

GSK Figures USD:

> 3rd Quarter 10
US$67m sales in USA
US$34m sales in Europe
US$11m sales in Rest of World


Total = US$112m total sales for quarter

> 2nd Quarter 10
US$69m sales in USA
US$41m sales in Europe
US$9m sales in Rest of World

Total = US$119m total sales for quarter

> 1st Quarter 10
US$61m sales in USA
US$40m sales in Europe
US$8m sales in Rest of World

Total = US$109m total sales for quarter


> 4th Quarter 09
US$69m sales in USA
US$42m sales in Europe
US$8m sales in Rest of World

Total = US$119m total sales for quarter



Here's some interesting reading on the Generics Industry from a little while back and the penetration it has and may/will achieve:

The US Generic Drugs Industry Overview
By Themedica on April 6, 2009 10:50 AM | Permalink
Generic drugs or simply generics are pharmaceutical drugs that are produced and distributed minus the patent protection. While these drugs may still hold the patent on the formulation, the active ingredients are not protected.

The history of generic drugs in the United States dates back to the 1960s, however it was only after the passage of the legislation 'Drug Price Competition and Patent Term Restoration Act of 1984' also known as 'Hatch-Waxman' that the drug industry flourished. As a consequence, the size of the industry grew from a meager $1 billion in annual revenues to $63 billion at present. Today, close to 69% of all prescriptions in the US include generics.

The US Generic Drugs Industry

The total US generic pharmaceutical manufacturer sales for the year 2007 was$58.5 billion, whereas the sales of branded pharmaceuticals during the same year amounted to $228 billion.

The FDA's Orange Book, which is a compendium of approved drug products lists over 12,751 drugs, of which more than 10,072 or 79 percent of the products have a generic version available.

About 2.6 generic pharmaceutical drug prescriptions are dispensed on an annual basis. Generics drugs account for 69% of all prescriptions dispensed. According to IMS Health's National Prescription Audit the top 10 generic drugs, by prescriptions for the year 2008 were HYCD/APAP, Levothyroxine, Amoxicillin, Lisinopril, Simvastatin, hydrochlorothiazid, amlodipine besy, azithromycin, warfarin sodium, and furosemide.


The key reason behind the popularity of generic drugs is that they can save both the patients and insurance companies substantial costs. Once a drug loses patent, competition among producers becomes tough. Despite the competition, since companies do not develop these drugs from scratch they are able to make and sell them at lower cost to consumers and yet maintain profitability. For example, according to the National Association of Chain Drug Stores, the average retail price of a generic drug prescription was $34.34 in 2007, while for a brand name prescription drug the average price stood at $119.51, which is three and half times higher. On similar lines a Congressional Budget Office study in 1998 found that generics can save consumers between $8 billion and $10 billion annually.

According to IMS Health, the generic drugs industry is expanding at a growth rate of 7.8%, which faster than the world's market for pharmaceuticals.

Generic Drugs Industry Facts & Trends

◦The market share of the generic drug industry will capture a larger share of the drugs market worldwide. Estimates reveal that the brand name drug sales of $70 billion will face increasing competition from generics through 2012.
◦Efforts to increase the generic substitution rates from 65% to over 70% for all prescriptions in order to save money for consumers and the government is favorable to the generics industry.
◦Consolidation of of small and mid sized companies by industry leaders will continue.
◦In 2009, a number of blockbuster drugs are losing patent protections, some of them include Prevacid, Imigran, Arimidex, Keppra, Cellcept, Flomox, AmbienCR, Valtrex, and Topamax.
◦There is also a possibility of bio-generic drugs to surface. These drugs will be the generic versions of costly medicinal biotechnology products.
◦An aging population and growth in the U.S. prescription sales indicate brighter prospects the industry. For example U.S. prescription sales achieved a growth of 1.3 percent in 2008, to $291 billion. Further, the dispensed prescriptions by volume grew at a 0.9 percent pace.
◦Generics industry's double digit growth rates will continue through 2011 to $69, and will make up 20% of the total pharmaceuticals market .

◦Major growth in the market will come from respiratory, central nervous system, gastrointestinal and anticancer therapeutic agents. Further, cardiovascular drugs alone constituted a major chunk of generic prescription market of about 21 percent in 2002. Other popular categories of drugs included anti-infective drugs (14.4%), and antiarthritics/analgesics (14.0%).

◦Amongst the emerging economies, while India is able to supply a low-cost, high quality finished dose products, whereas, China is able to provide low-cost, high quality API and drug intermediates.

◦The top eight global markets are the U.S., Germany, France, the U.K., Canada, Italy, Spain and Japan, which account for 84 percent of total generics sales. The US market, currently valued at $33 billion, is the larges market in the world accounting for 42 percent of global sales.



The 2009 financial crisis has presented the healthcare industry with many challenges, however, its not been hit as bad as some other industries such as the automotive sector. It seems that as the economy recovers, there will be many opportunites for business to profit from, such as the generic drugs industry.

http://www.themedica.com/articles/2009/04/the-us-generic-drugs-industry.html




More reading if interested:

http://www.icis.com/Articles/2010/02/15/9333169/generic-drugs-sales-continue-to-climb.html




Expert Opin Pharmacother. 2011 Jan 20. [Epub ahead of print]

Fondaparinux for the treatment of superficial vein thrombosis in the legs: the CALISTO study.
Bozzato S, Rancan E, Ageno W.

U.O. Medicina I, Ospedale di Circolo, Viale Borri 57, 21100 Varese, Italy +39 0332 278831 ; [email protected].

Abstract
Superficial vein thrombosis (SVT) is quite a common disease that is associated with a non-negligible risk of progression to the deep venous system and, in some cases, of embolization to the lungs. However, SVT has traditionally been regarded as a benign disease and its optimal management has been poorly studied. Recently, fondaparinux, a subcutaneous, selective, indirect Factor Xa inhibitor, has been assessed in the treatment of SVT in the CALISTO study, with encouraging results. Fondaparinux was found to be more effective than placebo in reducing the risk of SVT extension or progression to deep vein thrombosis or pulmonary embolism without a significant increase in the risk of bleeding. Treatment of SVT with a once-daily, 2.5 mg injection of fondaparinux without the need for platelet monitoring appears as a simple, effective, and well-tolerated strategy, and has the potential to change the clinical management of SVT.

http://www.ncbi.nlm.nih.gov/pubmed/21247361