OK, so I have been throwing around a fair few things in my head with regards to TIS and thought I would just start writing and see where I end up, a lot of assumptions and guess work until we land the commercial partner deal and know the structure a little better.
So what are we looking forward to in the short term:
1. Updates as to how the new Euro trial is going, which could come through any week now - I believe these are important because we are using the new formulation and I'm sure the potential partner/partners would be interested also.
2. As Steve Mercer said at the AGM, we are at the pointy end of negotiations with 6 major international wound healing/pharma companies and have the consultant in to help finalise the deal. This deal could be stitched up as early as this month some time or could run over into Jan but I certainly wont be taking the punt as to exactly when that will be. I think the deal/s made will add significantly to the shareprice, as you will see by some figures below.
3. Finalising the Euro trials and submitting for approval which will in turn get us into Australia/Canada/Europe/Britain. Our product could be in use as early as Q3 next year, entering a multi $bln market with the best and cheapest product.
Now entering into the markets mentioned in #3 above I thought I would look at it as though we are looking at 35% of the total market opportunity (yes this may be short/lower than the real%) just to get a grasp on some very near term figures that we may see as of 2011. The figures will come directly from this piece in the Annual Report:
"Worldwide, it is estimated that patients suffering diabetic, venous and pressure ulcers spent US$4 billion in 2007 on wound dressings, with a compound annual growth rate of 11-15%.(1, 2) World market growth is being driven by an aging population, an increased incidence of diabetes and the increasing affordability of health care in developing countries.(1, 2) The potential for consumer, retail and acute wound care products offers an additional and substantially larger opportunity."
"Up to 70% of all lower limb amputations in the world are related to diabetic ulcers. A lower limb is lost to diabetic ulcers every 30 seconds. This represents more than one million amputations globally each year(5)."
OK so compounding this from 2007 we should be at around $5.47bln as at the end of this year using the 11%. So I'm going to use the $5.47bln and look at us gaining 30% market share of existing and 50%. Considering VitroGro could quite well become the gold standard for the patients suffering diabetic, venous and pressure ulcers I think these are conservative percentages, after the figures I'll elaborate on my thoughts.
35% of the $5.47bln = $1.9bln (approx) market opportunity ** I will use 15% of total sales as profit to TIS and take off $200m (a little over 10%) for a reduction in price for VitroGro use **
## 30% market penetration ## Euro/Aust/Canada/Brit only
$1.7bln x 30% market share = $510m in sales reveue $510m x 15% of revenue = $76.5m profits to TIS Take out $5m yearly cash burn (more than current) = $71.5m Take 30% tax = $50m (will have claims to offset that rate) Divide $50m by 140m shares = 35.7c EPS
10 x PE = $3.57 15 x PE = $5.35 20 x PE = $7.14
## 50% market penetration ## Euro/Aust/Canada/Brit only
$1.7bln x 50% market share = $850m in sales reveue $850m x 15% of revenue = $127.5m profits to TIS Take out $5m yearly cash burn (more than current) = $122.5m Take 30% tax = $85.75m (will have claims to offset that rate) Divide $85.75m by 140m shares = 61c EPS
10 x PE = $6.10 15 x PE = $9.15 20 x PE = $12.20
*** All in USD ***
Using the same methods but looking at what could be for total worldwide sales and the $5.47bln reduced to $5bln for VtroGro cost savings we look a little something like this:
## 30% market penetration ## Worlwide
$5bln x 30% market share = $1.5bln in sales reveue $1.5bln x 15% of revenue = $225m profits to TIS Take out $5m yearly cash burn (more than current) = $225m Take 30% tax = $154m Divide $154m by 140m shares = $1.10 EPS
10 x PE = $11.00 15 x PE = $16.50 20 x PE = $22.00
## 50% market penetration ## Worldwide
$5bln x 50% market share = $2.5bln in sales reveue $2.5bln x 15% of revenue = $375m profits to TIS Take out $5m yearly cash burn (more than current) = $370m Take 30% tax = $259m Divide $259m by 140m shares = $1.85 EPS
10 x PE = $18.50 15 x PE = $27.75 20 x PE = $37.00
*** All in USD ***
Now I know those total sales are scary big and I wouldn't be surprised if someone tried to buy us out before then, also I'm not too sure of the price reduction that TIS will enter compared to what is spent now so I simply took off around 10%, it could be 15/20% because of the success that VitroGro could have meaning less visits and cost to the patient.
Why was it that I think we can at least get 30% penetration and if not a whole lot more? Because of the associations we have and the people leading our trials for us:
*** For our UK trials ***
Keith Harding (text from the Smith and Nephew site) Professor of Rehabilitation Medicine (Wound Healing) University of Wales College of Medicine, UK Keith Harding, MB ChB, MRCGP, FRCS is a professor of Rehabilitation Medicine at the University of Wales College of Medicine with an expertise in basic science and prevention and treatment of all chronic wounds. For the past ten years he has been director of the Wound Healing Research Unit, a self funded unit within the College of Medicine, designed to provide academic and clinical focus in wound healing. Professor Harding is a founding member of the European Wound Management Association, President of the European Tissue Repair Society. He has authored over 200 publications in peer review journals. From 1980-1990 he was principal in General Practice in Cardiff, UK.
*** For our Aussie trials ***
(Sept announcement by TIS) This human trial of VitroGro� was conducted by Professor Michael Stacey at the Vascular Research Laboratory in Western Australia and statistical analysis was performed by staff from the University of Western Australia.
Michael Stacey (text from the Smith and Nephew site) Associate Professor of Surgery, Fremantle Hospital, Australia Michael Stacey is a general and vascular surgeon and has a research interest in wound healing and chronic venous disease. His specific research interests are in the biochemistry and molecular biology of impaired healing in chronic venous ulcers. He also has research interests in venous physiology, pressure ulcers and diabetic foot ulcers. He was Inaugural President of the Australian Wound Management Association. He is currently Chairman of the World Union of Wound Healing Societies, and is on the Editorial Board of a number of journals associated with wound healing, in particular Wound Repair and Regeneration, The Journal of Wound Care, and Primary Intention.
*** For our Canadian trials ***
(From Nov 09 CEO Presentation) Two sites: - Professor Michael Stacey, Australia, targeting venous ulcers - Professor Gary Sibbald, Canada, targeting diabetic and venous ulcers
R. Gary Sibbald (text from the Smith and Nephew site) Professor of Medicine and Public Health Science, Director of Continuing Education, Department of Medicine, University of Toronto Director, Dermatology Day Care and Wound Healing Clinic, Sunnybrook and Women's College Health Sciences, Toronto, Canada Professor R. Gary Sibbald is a specialist in internal medicine and dermatology with a special interest in chronic wound care and a master�s degree in education. He was a founding board member of the Association for Advancement of Wound Care in the United States and a co-founder and past chairman of the Canadian Association of Wound Care. His dermatology expertise led to his roles as advisory council executive member for Canada of the American Academy of Dermatology and a previous president of the Toronto Dermatological Association. Professor Sibbald is the director of continuing education for the Department of Medicine at the University of Toronto and chair of the Faculty Continuing Education Committee and a board member of the Canadian Association of Continuing Health Education.
Presently, Professor Sibbald is the director of the Dermatology Daycare and Wound Healing Clinic at the Women�s College Campus of Sunnybrook and Women�s College Health Sciences Centre. He is the director of the International Interdisciplinary Wound Care Course at the University of Toronto and co-editor of the Third Edition of Chronic Wound Care: A Clinical Source Book for Healthcare Professionals.
On the international scene, he is the chair of the Education Committee of the World Union of Wound Healing Societies. Dr. Sibbald has lectured and presented at over 500 scientific meetings on five continents. He has published over 100 articles and book chapters.
So the above people for our first entry into the Euro/Aust/Canada/Brit markets is a huge plus in my mind and on top of all that we have Prof Keith harding on the TIS team as an Independant Advisor. Now the above are just mad ramblings and should be treated that way, but even if you decided to say "nah I'll halve everything" the figures still more than stack up!! I wont go into it all now but the above is just a small portion (first point in the list below) of what is to come, let's not foget about all the other opportunities:
Target Product Applications
* Diabetic, Venous & Pressure Ulcer Dressings - Accelerated healing, dressing change every 3-4 days - Correction of wound tissue pathology and physiologic delivery of appropriate growth factor activators * Burns Dressings: Paediatric & Adult - Accelerated scarless healing * Surgical Wound Applications - Wound closure for at-risk patients e.g. obese, diabetic, smoker, advanced vascular disease - Other surgical applications e.g. stoma care * Product Cascade: Specialist Unit to Retail - Specialist unit � general hospital - outpatient - GP - pharmacy - retail - Potential retail applications include dressings, creams, lotions, product range for burns, chronic wounds, acute sunburn etc.
TIS Price at posting:
43.9¢ Sentiment: LT Buy Disclosure: Held
