I’ve tried to put together some thoughts/research into the potential market for RHT and what the company might be worth. I’ve included some links at the bottom of this post as references.
For me, in order to begin calculating a value for this company I had to start by trying to answer questions such as: • What are our products? • What do they do? • What is our potential customer base? • What is our profit margin on products?
Products
The 3 products we have (or are in the pipeline) are: • Ferriscan; • HepaFat-Scan; and • FibroScreen.
Applicable Uses
Ferriscan measures liver iron concentration. Associated disorders include Haemochromatosis, Thalassemia, Sickle Cell Anaemia, Diamond Blackfan Anaemia and Myelodysplastic Syndrome.
HepaFat-Scan measures the amount of fat in the liver. Associated disorders include Fatty Liver.
FibroScreen is an MRI based liver fibrosis scoring platform.
Epidemiology
Note: I have only included figures for those nations/regions where RHT currently has operating centres.
Using populations and applicable epidemiology rates for the relevant nations/regions, it shows the following potential number of patients for each disorder (total for all nations/regions serviced by RHT):
Ferriscan:
Haemochromatosis – 15 million Thalassemia – 152 million Sickle Cell Anaemia – 1 million Diamond Blackfan Anaemia – 23 thousand Myelodysplastic Syndrome – 45 thousand
HepaFat-Scan: Fatty Liver – 136 million
FibroScreen: Liver Fibrosis – 45 million
Profit Margin
There was some discussion at length on HC a few weeks ago with the general consensus seeming to arrive at a charge rate of $300 per scan. I have used a profit margin of $30 per scan, which I consider to be extremely conservative considering there are relatively very few direct costs for RHT’s products once the software has been developed. My understanding is that the software can be simply loaded onto an appropriate computer whenever a new centre is opened. Operator’s costs will be there of course as will indirects, but it is not as if we need factories, large scale plant or such. In short I feel the $30 profit margin after such costs is more than fair for the purposes of estimating.
Valuation
In order to value the company I have made the following assumptions: • Only 1 in 1,000 of the people afflicted with the relevant disorders in the nations/regions we are currently servicing get access to the relevant RHT product (i.e. from the Epidemiology above for Haemachromatosis 15 million / 1,000 = 15,000 people suffering Haemachromatosis get access to Ferriscan); • Each person getting access to these RHT products gets 2 scans (In reality I suspect it would be many more through the diagnosis & treatment procedures, but I will stick with 2 to again be conservative); • Profit per scan = $30 • P/E ratio of 10 (could be higher for such a growth company/industry, but again I’d prefer to be conservative. (I’ll spare everyone the math unless someone isn’t sure how to arrive at the following figures)
With the CPT Editorial Committee meeting currently underway in the US I expect another kick in the share price on Monday to reflect the quantum leap in product (and importantly, reimbursement) access this code represents.
NOTE: I am not a financial adviser and none of the contents of my posts should be taken as financial advice in any way. Please always do your own research.
RHT Price at posting:
6.8¢ Sentiment: Buy Disclosure: Held
