Thanks Bob,I have now seen the BBY research. For those...

Thanks Bob,

I have now seen the BBY research. For those interested you can take a look:
http://www.scribd.com/doc/189093918/BBY-ACR

I wouldn't place much weight on it as this is a very poor report IMO. Certainly wouldn't be rushing to sign up with BBY if this is the extent of the research they provide -

here's the crux of BBY's position:

"The 14% fall in sales of Acrux Limited's (ACR) Axiron testosterone lotion in the September quarter is symptomatic of the significant headwinds it faces in the US testosterone replacement market. We cut our FY18 Axiron sales forecast by
43%, from US$574M to US$327M, due to lower market growth rate and peak market share assumptions. and our
expectation that safes will fall when cheap generic copies of competing testosterone drugs enter the market in August
2015. We lower our DCF valuation and price target to A$2.14/sh (from A$3.02/sh) and retain our UNDERPERFORM recommendation."

my observations are as follows:
1. FY18 net sales of US$327M for Axiron indicates an assumption of c. 20% market share - this is not too far from where i am. If ACR can achieve this level of market share (with a fade of -10% share over the next 5 years post FY17 as generics enter the market) then the US Axiron opportunity is worth $1.50 (NOTE WITHOUT any new milestone payments)
IF they get 100% of the milestone payments then you are looking at c. 52c upside - so $1.5 + 52c = $2.02 per share.

Based on my numbers it looks like BBY is only counting the US Axiron opportunity with milestone payments.
What about Canada, Germany and Brazil? these 3 markets are worth more than US$150 for transdermal testosterone (with total ex US market >US$300m)

2. The 14% fall in sales of Acrux for Q3 was due to the rebate adjustments made in that quarter - read the AGM address / presentation here - clearly the BBY analyst does not understand how Net Sales are recorded here.
The analyst jumps from one data point Q3 net sales to a conclusion that Axiron is facing "significant headwinds" - which IMO is very premature / lacking any real evidence here.

3. ACR / Lilly has patents outstanding which will limited "cheap generic copies" till 2017 at the earliest / 2030 at the latest. Yes, they are challenging the patents - but IMO this does not have any legs. Refer to the following link for more detail
http://www.iniplaw.org/2013/11/eli-lilly-sues-actavis-for-inf.html

Open to discussion on the threat here - but i don't see this an issue post FY17. A bigger issue is oral formulations and other new FDA approved competitors... this is probably overstated at this point (as getting FDA approval is not easy matter) but an threat / risk all the same.

as for the LIC advice - agree with Slogger here - if the price ever got to $1.50 without some significant new risk emerging i would be backing up the truck :-)