Warning: this is long, so I've broken it into two parts...the main bit and then the appendixes....please enjoy.----------------------------------------------------------------------------------------------------------
I'm starting to get asked, Mozzarc, when will we reach revenues of 1 Billion Dollars? Will it happen in my lifetime? Will it ever happen? Hey, I have no Crystal Ball...All I can do and say is to try and base an answer to such a question off a couple of points:
1) Research of what we have and what others have done and try and forecast how it might pan out
2) Comparisons between us and similar companies and how they have gone in the past and their respective growth trajectories.
Tonight, lets put on our predictive hat and try and take a glimpse into the future...Paradigmers, think of it is like this. We are getting in at Ground Level here in terms of the investment timeline.Whatever do I mean? Well there is very little difference between the view from level 20 of a building compared to level 30...ie a company that is already making millions of dollars of revenue, add a few more millions, whats the bearing on it, whats the impact on the share price? BUT the view comparison between Ground floor and the same level 30? Vast... and the same holds true in our investiture in PAR, we currently have
NO revenue...but in just a few years time? What will the SP be like then Paradigmers?
No great view-difference between Level 20 and 30...but how about 0 and 30? We are at slightly above zero now!Ok I'm going to present to you your 4 different possible paths...of course there may be more...who really knows the future, but keep an open mind and of course feel free to debate or put forward your own ideas, these are just my views remember.
- CASE 1 The most conservative view
- CASE 2 The most probable view in my view
- CASE 3 An optimistic approach
- CASE 4 A super optimistic approach
CASE 1 - The most conservative viewTrial 3 starts April 2020. Why the delay, well PAR have to put a robust trial forward to the FDA, we haven't even filed the IND for OA yet, that's usually like 3 months prior to the main filing.We need to work out whether we are comparing the results of PPS with a placebo, or will it also go up against the current std of care? Or both? How many patients, where will they be, we have a hint that it will be multi site across at least a few countries. What will be the endpoint? We need to spend quality time getting this right. April 2020, maybe that's too optimistic?Recruitment, how long does it take to line up some 500 + patients...will it be that or more? Who will be the clinicians, and the test team, how will the results be obtained and the sanctity of the tests and results be maintained?
Lots to think about and get organised in this crucial design phase. Conservatively I can see this taking at least 3 months in itself? Ok now we are up to July 2020.Too'ing and Fro'ing, between PAR and FDA? Lets say the trial three goes for 18 months..we are now at Jan 2022. The final go ahead...will take at least a month or two after that to begin distribution, are we doing that on our own or with our new found Big Phrama partner? If partnered then yes it will be a quicker path..if not...then slower...but as a rough we can say we start by March 2022.Applying Appendix A (see below) for details) we come to a Billion by....
March 2025.
CASE 2 - The most probable scenario in my viewsTrial 3 starts Feb 2020 Recruitment 2 months (April 2020) FDA Process - Fast Track designation achieved - 1 Year (as opposed to 18 months plus) this now takes us to May 2021 Commercial go ahead June 2021. Applying Appendix A we are at 1 Billion by.....
June 2024.
CASE 3 - Optimistic viewLess probability of this but there certainly are chances:Trial 3 starts January 2020 Recruitment 1 month, easy to get people that have heard of Paradigm in the US as word has spread a little due to the current 10 American patients and a bit of good press that we get early Jan 2020 aided possibly by Paul being in the USA as I type (Thanks SoldierOfFortune).Fast Track designation awarded - 1 Year, Thus Commercialiation GO by Jan 2021.Applying Appendix A - we are at a Billion in revenue by....
Jan 2024CASE 4 - Hyper Optimistic CaseOk much smaller chance of this panning out but lets speculate anyway, call me a dreamer...Third Phase Trial Starts January 2020 Recruitment 1 month...start the Third Phase in earnest in Feb 2020 and again we have Fast Track designation...we wait patiently as we sometimes get the odd update from PAR reporting that the FDA are happy with hows it going, good feedback in both directions, PAR's staff are kept busy facilitating a few questions here and there but its looking good..BANG! In July we get the news that the FDA are impressed with the results, Breakthrough designation, the trial has been open and we have 3 months to disclose our marketing and distribution plans and again prove capacity to scale and sure up manufacturing. Commersilation is granted shortly after in September 2020 after face to face meetings with PAR management in the USA (Yes I'm dreaming aren't I?). One Billion in revenue achieved by
September 2023.
As I said, not a great chance, I'm certainly NOT counting on this situation but there is a very small chance it might play out like this perhaps a little more conservatively?At $1 Billion revenue we are looking at a SP of some $100. (Figure 1)
Figure 1 - courtesy 51Capital. Thanks Oxxa for posting these articles, made my life much easier to copy and paste.Whatever plays out...we must take into consideration what can go wrong, it may not be completely plain sailing but as it unfolds we will get a better idea of timelines and the path hopefully to 1 Billion plus revenue. GLTAH and of course, Do you own research!
APPENDIX AI've broken the calculation and my thoughts up for the benefit of PAR readers that don't want to waft through my thoughts and just want a shorter and sharp answer to such questions. For the rest, here are my thoughts and how I came up with the final timeline on the ultimate path to $1B.
The best way to come up with % of Peak revenue is to look at other companies, below is a typical table of how a lot of Bio Phrama's sales can generally pan out.As an average it's 10 years to achieve Peak sales.
Table 1 - Possible projected revenuesThis is a very rough estimate and I personally think we will beat the average, perhaps we will hit the Peak time at about 8 years from the GO that the FDA hopefully grants us. Why an 'aggressive' 8 years instead of 10, because there is currently no real viable competition, we have this market to ourselves. Currently in the field of OA we are very limited with safe and effective treatments for not only pain but slowing the progression of the disease, "the long clinical trial periods for pharmaceuticals mean that surprise competitive introductions are unlikely"
1 meaning that at least for some years we will have a good window of opportunity.
A real window of opportunity exists, its still not too late...specially when forecasting out the possibilities in any of the above 4 case scenarios.If we assume the 'Peak sales' take place in the 8th year according to an average of a number of Bio Phrama companies, then we could expect a trajectory of the above table 1 of projected revenue which I've put together after reading some average trajectories in our field of Bio as well as a couple of other industrial company fields:
Assumptions: TGA approves in Australia 6 months before FDA approval, so we get some revenue earlier as a result of the Australian market$200 USD per dosage ie 12 x $200 = $2400 Discounted back by 85% as a royalty (Royalty of 15% that we keep) [doesn't sound fair does it?] as we have done a partnership for distribution in key markets. This gives us total revenue for us at $360 USD...per course.(Don't forget we would get a large upfront payment and further milestone payments but I'm assuming we use this to facilitate other markets where we don't have tie up, payments to Bene, variable overheads such as increase in marketing and staff. etc so I'm not including it in my model).
A typical generic cash flow model can be found below (Figure 2), I'm superimposing such a template on how I think things may go, but in truth there are too many factors to really do this with the limited knowledge and research I can do. Anyway, the purpose of this is to come up with a
rough idea of how things
might play out.Definitely don't rely on any of this material, formulate your own opinions and come up with your own predictions.
Figure 2 - a typical revenue flow - we're still negative but I don't see it being that way for too long. Figure 3 below depicts some of the main considerations for a revenue model, a lot of these we have addressed well already. We have little real competition, there will be strong barriers to entry and any other viable solutions are years away from being approved.
2 Valuations of a given company will of course not just depend on actual revenue, "Almost 80% of the constituent companies of the Nasdaq Biotech Index (NBI) companies have no earnings; over 150 companies representing over $250 billion in market capitalization."
2 and further, "it’s clear that this cannot be simply explained by the exuberance of investors". It's whats in the coming, pipeline, what growth can be anticipated, how well will this product do in the future?
3
Figure 3 - Lots of factors to play with in a given revenue model.In any good valuation model four factors need to be considered:
1) Garner an understanding of how many people suffer from the disease. Easy to do in our case, we can take the total number of estimates of OA, readily available, we can divvy this up into the stratum, we can focus on our band (4-7 KOOS).
2) Estimate the number of people that will actually take the drug, many will not even go to the doctor, others will not be in reach of one etc.
3) Obviously limit the numbers to areas that have had or will have approval
4) Make an estimate on the market share of the drug, what is in competition, what are the alternatives, is price a factor and the method of infusion/delivery?
APPENDIX B - CALCULATION NOTESTo get to Peak Sales, we know that higher stratum is approx 27% " In 2014, more than one in four adults with arthritis had severe joint pain (27 percent)"
5, if we shape a Bell curve we could guess that the lowest pain stratum may have around the same percentage, so that roughly gives the middle stratum as about 40%...lets go conservative again and say its only 30%.Of this, 50% may not have access or can't afford it and will never go to a doc in any case to get it diagnosed no matter what.In absolute numbers this gives us 30 Mil x 30% x 50% = 4.5 Million for the US... that would then equate roughly to 350,000 in Aus. The Aus prevalence is a little higher so I've rounded up from 330K to 350K. UK gives us around 900,000 patients.Total Peak in the three markets is a grand total of 5.75 Million.
Crazy numbers, let's now discount this by a full 1 million to err on the conservative side. At 4 Million patients assuming just one dosage program (12 injections at $250 each) gives us some
12 Billion Revenue.1 Billion is 12% of this and would occur by year 2! It still seems a bit high to me, so lets push it to year 3.This is how I'm calculating Appendix A to be 3 years.I'm not even really adding
anything for the 7 million ACL injuries. I also am just concentrating on OA. What about MPS?
I haven't even considered a single $1 in this model.Again I'm not including anything for any DOD deal we get in respect to the CHIKV or RRV. Yes it seems a bit too much and even slightly overwhelming but it really is possible, this heavy duty freight train journey is just beginning.
PAR's freight train is starting, we are on board and I suspect we'll have a few American investors clambering on soon as well.BLURBAlways best to do your own research, there are plenty of forward looking and optimistic statements here. There can be hurdles and negatives that we may come across on this exciting journey, factor these in! Remember, don't
ever invest too much in one asset class and/or one investment instrument.
REFERENCES1 http://www.commercialbiotechnology.com/index.php/jcb/article/view/445/441
2 https://www.toptal.com/finance/valuation/biotech-valuation
3 https://www.cdc.gov/arthritis/basics/osteoarthritis.htm
4 https://www.arthritis.org/Documents/Sections/About-Arthritis/arthritis-facts-stats-figures.pdf
5 http://www.adelaideequity.com.au/
(20min delay)