Having listening to the CC, I'm out of there with a clear conclusion: The PPPS division is worth much, much, much more than the 3$ we've been talking about! :-)

We already knew that CNBG will bring in about 22-24M$ gross margin. Octopharma about 15$.
Let me guess Nant brings in as much as CNBG, and Novozyme and Halozyme each as much as Octopharma. Say that's a total of about 90M$ of gross margin for these Fantastic Five.

We already know that every 25M$ of earning is worth ~1$ a share at a P/E of 20.
So without any Orphan Drug, we already are over the 3$ of value for PPPS.

Our first protein-indication T1PD is estimated to be worth about 50 M$ / year in revenue at delirious profit margins (>> 90% as Fred told it was 1.6 / 1,000,000 so about 500 cases in the US: 100 000$/patient-year!!!). So say 1-2$ a share just for this protein-indication.

Let's say that every other Orphan-Drug protein-indication that we receive FDA-blessing for will also net at least 25M$ so 1$/share. (It's probably more than that, as T1PD is more about 2$, but let stay conservative.)

The real cool part of PL answers in the CC was the window he opened over their consideration for Orphan Drug selection. What they are caring about right now, is finding the quickest highest yield combination to bring in value as fast as possible. They are studying the indication with higher needs (and thus less barrier to entry, and quicker approval) highest actual cost to Medicare (so they can reap the largest sum out of it) and most efficient manufacturing synergies with existing process (it seems their is such thing with their technology). What this suggest is that there is a _lot_ of possible protein-indications they have to sort out to find the most _powerfull_ one, i.e. highest money the quickest. They are concerned of doing the right choice for their first targets, in order to not dilute their effort: again this is about earning growth _power_.

Earning growth power is a very nice consideration to have right now as we want our SP to grow fast because it is so undervalued that it make look like a very nice prey. And I'm very happy our exec cares about this. Harvest the largest lowest hanging fruit first is always a good idea. But what delights _me_, as a long term value investor, is the _depth_ in earning potential that it suggests, once large low hanging fruits have been grabbed. And that is exactly what PL talk tacitly suggest. A very large basket to pick fruits from.

My point is that once the earning growth power consideration will be behind us, there seems to be a _lot_ of protein-indications left in the basket, and there is _no_ reason, with the money earned from early large low hanging fruit, to not harvest them _all_, with time.

And at ~1$ of value per protein-indication... It's just gonna mean an insane valuation! :-D

(Oh darn I forgot Hematech that we own at 50% on top of that!)


---post by fdesloges---