biota will enjoy all the spoils-the australian, page-27

Sorry I couldn't respond earlier. Moreld, I appreciate your input and I agree on many of your points and I would like to continue a respectful vigorous discussion. I agree with you that Phase III still has some risks associated with it, in most cases it is higher than 25% risk but in Biota's case I will agree that 75% success likelihood is in the ball park, given it's success in Japan. I have no argument with that.

To be honest I have not read Wilson's report and I am relying on second hand information posted on this forum but I have read the RBS Morgans report

http://www.biota.com.au/uploaded/154/1021734_41rbsmorgans-bta110216_at.pdf

which is significantly more bullish than Wilson's, and while still very conservative, makes more robust assumptions in my view. Remember this report was written pre BARDA.

If you dissect this report their target of $1.67 is discounted because of the risk of not getting the BARDA money. This is no longer the case, and again second hand information is that their amended target post BARDA is about $2.40.

I quote from their report:

"If BTA is successful in securing the non-dilutive funding this would enable it to complete the Phase III clinical program and potentially secure a far higher
royalty on sale. We have run a sensitivity analysis on the royalty and every 1% increase in the
royalty rate boosts our valuation by 12c."

Given that part of Biota's brief for the BARDA grant is that they set up native US manufacturing, and that BARDA is also the eventual biggest single buyer through replenishment of the US pandemic stockpile, Biota have unprecedented control over the whole process and, if successful in Phase III, will rapidly turn over a massive profit at first through selling to BARDA.

I think it is not unreasonable that Biota will obtain a "royalty" figure of 50% or so. Given all the work they will have done, they will be the ones calling the shots and could be even setting up the manufacture and sales themselves, from start to finish, subcontracting the various processes out on a fee for service basis. So it is really a net profit, rather than a royalty.

If we take 50% net profit ("royalty")
50% x 12 c = $6.00

Truly the Criterion has made the call here, "Biota will enjoy all the spoils". No more sharing with GSK or other big pharmas, they can go jump and come begging to Biota!

It seems to me by their graph they have made the conservative assumption that LANI will only capture one segment of the influenza drug market. My view is that LANI will rapidly dominate the entire influenza drug market. This is based on the first 8 weeks of sale on Inavir in Japan, where we had the unprecedented situation of a new, unknown drug, with 2 long established competitors, Tamiflu and Relenza, and Inavir outsold them both. Instantly!

RBS Morgans values the rest of Biotas pipeline and Relenza royalties at about a dollar, which in my view is fair enough at this stage.