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Value.able: Acrux

Media Room, On the Internet | Comments (66)

Value.able: Acrux

Roger Montgomery identifies one businesses that stands head and shoulders above the rest of Australia’s fledgling pharmaceutical industry. And it hasn’t been taken over yet! Read Roger’s article at www.eurekareport.com.au.

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Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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66 Comments

  1. Slickist
    :

    ACR with the sudden change in fortunes from US court ruling where is the bottom for this now unfavorable company. The loss of patent on a product that relates to 80% of there income leaves a valuation of less than 20c per share does anyone see there potential in up and coming revenue streams?

  3. Tony Connellan
    :

    To Roger,value.able students & staff
    I find the discussion on ACL by Ron,Matthew,Mal &others Enlightening & says to me to be wary of making share purchase decisions heavily based on collected data or formula. Would any of the medico staff or students like to comment on Sirtex (SRX)? This company was flagged on the blog as an A! & A2 in Dec 2010. Its claim to fame is the development & commercialization of Yttrium 90 micro spheres.My memory says these spheres emit Beta Radiation and a much older memory says Beta rays have a very short penetration as compared with Alpha or X ray.The coy claims reduced radiation colateral damage.
    How do the medicos view these claims from a competive advantage point of view?Dose sales appearto be climbing ok.
    Tony

    • Roger Montgomery
      :

      Just remember Tony; understand the business. You don’t have to understand EVERY business, but you do have to understand those you wish to purchase. The Intrinsic value and quality process is therefore vital.

    • Matthew R
      :

      Maybe there is an oncologist or gastroenterologist who can help? Well out of my area I’m afraid

    • Rob
      :

      Hi Roger,
      I was going to post along the same lines.

      This is a great example of the importance of understanding a business. This blog has a large number of very intelligent contributors from all walks of life.

      I can read about pharmaceutical companies all day long and from a lot of knowledgeable people but it will be their understanding of the company, not mine. I have a much better chance with IT or retail.

      Ron has quoted you as saying “When you see value, it smacks you right in the face!”.

      If you don’t understand the business, no matter what any expert tells you, then you can’t possibly have that “smacks you in the face” experience.

      I’ve only had that experience with, of all things, a gold stock. I think it’s probably a good thing that I don’t get too excited too quickly, it probably makes me a little more cautious.

      Roger, on your A1 service, I’m sure a lot of people would love to have the A1 service come out before the reporting season, just to make their lives a little easier.

      Cheers and thanks for creating such a great community.
      Rob

      • Craig
        :

        I support this approach Roger.

        If only I had a dollar for every project that someone wanted pushed out the door early despite it being unfinished. The project inevitably remains forever unfinished, only to be superceded by an equally unfinished future project….. that was requested because the first project was ultimately deemed not to have met it’s objectives!

      • Andrew
        :

        I’m with you Rob, i find it interesting hearing about industrys i don’t know anything about but it doesn’t mean i am comfortable investing in it regardless of how much value smacks me in the face.

        I will prefer to miss out as if i don’t understand it than i am just speculating and doing so because others say it is a good idea.

        I might one day understand this industry but until then i will happily read posts but not make any investing decisions. There are a number of these industrys i shy away from, i am still yet to understand the great love affair people have with gold companys, i stay away from resources as a whole, pharma is another one as i have no idea why XYZtex is better than ABCeutical in the treatment of some ailment which i also can’t pronounce. I will instead leave these to others.

        So much easier to focus on the industrys and companys i understand really well and can make informed decisions on. Other may wish to go digging in all industrys and any company for value but i prefer them needing to jump over 100 foot hurdles and present a good case for me rather than me go to them.

  4. bret
    :

    Hi Roger,

    When ACR paid out a big dividend from its big earnings does that change your valuation in any way. I’ve owned these guys for a while now but I was not sure how a big dividend payout would effect its IV.

  5. Edward V
    :

    Hello Roger and all,

    I’ve had a quick look at this business and its financials since 2001. It’s made losses from 2001 to 2009 and declared its maiden profit only in 2010. At first glance, it appears it should have more financial “runs on the board” before I’d commit to it.

    From my conservative investment view point, I’d rather see a history of profitability for at least five years and will leave this one to others. Nevertheless, base on the 2010 numbers, I’m assumed 100% retention of earnings and a 40% ROE with a required rate of return of 14% giving me a rough valuation of $3.26 (but will most likely be higher if the company improves on last year’s good results). I’d be interested to read from others their reasons for their valuation and what they think the company’s prospects might be. Roger, your article is, for me at least, a handy first step in identifying a business for the watch list. I’ll continue my research into this one and further refine my valuation.

    Regards,

    Edward

    • Roger Montgomery
      :

      I hear your point Edward,

      As I mention in the article, it’s just that you rarely get the chance to see financial runs on the board. They always seem to be gobbled up well before, leaving Aussie shareholders to carry the risk but little if an upside.

      • Edward V
        :

        Yes, you’re correct, and this is unfortunate for those shareholders who would sell out, but then again, if the shareholders collectively chose not to sell, surely they would enjoy the upside if the business is as good as it could be. Being gobbled up just doesn’t happen without willing sellers.

        The prospects for the business are good, but regardless, it’s still got a speculative element to it. The shareholders who have been with the company since the beginning certainly deserve the recent gains after the losses they’ve endured, and if they have a long-term positive view on the company’s prospects, why should they sell if they’re enlightened long-term investors? (A hypothetical question of course).

        I assume you’re speaking about drug-related stocks when stating that we rarely get the chance to see the profitability or ‘runs on the board’. Of course, there is a large number of good businesses on the ASX which have 10+ years of growing profitability (ARP, COH for example).

        Regards,

        Edward

  6. Nick Mason
    :

    A fine article Roger.

    The ‘Christmas Special’ blog you conducted last year was a great eye opener to me for many excellent company’s I’d never heard of and my pick of those nominated was Acrux. I never bought any shares although I’ve kept my eye on it ever since and have been greatly impressed with its progress. Congratulations to those with the foresight to have purchased shares in this excellent company last year.

    My recent nomination of ADO (operating within the medical industry although not one selling medicines) has been received with even less interest than my nomination of RQL although it is one I recommend to readers to keep an eye on, I am predicting a very exciting future.

    Best Wishes to all.

      • Nick Mason
        :

        Thanks for the compliment Ash. As I said previously, no history of earnings although its product, people and prospects all seem A1. I’ll be interested to hear your thoughts when you have the time.

      • Ash Little
        :

        Hey Nick

        I had a look and it is very interesting. The CEO has an excellent record and there is plenty of potential and promises.

        Whether this translates to returns for owners is too foggy to know

        SCE are pretty keen that is for sure.

        This is definitely not a Buffet style company but as you say….one to watch and I will put it on my watch but with a significantly lower value than SCE.

      • Nick Mason
        :

        Well picked up Ash, the CEO at Anteo Diagnostics, Dr Geoff Cumming, was formerly MD at Roche’s Diagnostic Systems (Oceania Regional Centre) where he transformed a loss making business into one achieving 30% annual compound growth over a four year period and the highest levels of profitability of any section within Roche’s global organisation.

        This was a very important reason for me to invest in Anteo Diagnostics.

        I’ve found that in the stock market, just as in life, past behavior is the best indicator of future behavior. That is not to say that past behavior is a perfect indicator of future behavior although it is the best. And this holds true more for people that it does businesses.

        Backing proven winners (people, more so than businesses) will often prove a profitable exercise and this was also part of my reasoning for investing in Vocus (where past figures were not available.)

        I also agree with you re. the SCE valuation. This did not even enter as a factor in my decision to invest in Anteo and I thought their method for deriving a value a waste of time considering it is comprised of factors completely unknown. With any speculative purchase, current value of the company is a non issue, it is future value which is important and this of course means that it is impossible to buy with a margin of safety because it doesn’t exist.

        Best of luck to you.

        P.S Am reading a very good book at the moment ‘When Genius Failed: The Rise and Fall of Long Term Capital’ by Roger Lowenstein.

    • ron shamgar
      :

      hi Nick.
      whats unique about ADO’s exciting future? i had a quick look and its not making money. please share your insights.
      cheers.

      • Nick Mason
        :

        Hello Ron,

        ADO has invented and is in the last stages (I believe) to patenting a unique technology (surface coating molecular glue) which will both quantitatively and qualitatively improve existing pathology tests. The technology, Mix&Go, will make the tests cheaper, faster and more accurate leading to a wide range of positives for any company using it.

        The reason it has such an exciting future is that it has currently licensed its technology to two companies, Bangs (USA) and Merck (Germany) and is in talks with over 60 others who are testing the technology in house, licensing (should it eventuate) will likely result in recurring royalties and up front revenues. Anteo Diagnostics has a massive market to expand into.

        Whilst doing my research I concluded that any company in the diagnostic industry not using ADO’s technology will be operating at a competitive disadvantage to its peers who are, the consequences of this are obvious.

        This is an amazing competitive advantage to have as a company. To have a product which is so effective that any company not using it will be operating at a competitive disadvantage to its peers.

        The technology invented by Anteo also has a number of uses in other industries although the concentration at the moment is the pathology sector.

      • Richard C
        :

        Hi Nick,
        I had a good look at the company upon your recommendation. For me the concern is that if the technology is so great, why aren’t more companies licensing the technology. Yes, no company has yet rejected the technology in testing but they haven’t been head over heels in signing up either even after a considerable time of testing. The CEO has suggested a number of times that additional licenses would be forth coming but it hasn’t eventuated.

        Also, it is difficult to work out how much revenue will be generated by the licences and how profitable the company will be. Revenues have been negligible so far, only $0.71m in 1H 2011. The market cap however is $54m.

        I’d like to see more licenses before I would commit and defiantly more revenue. Sure, I may miss out on the surge if there are new licenses announced tomorrow but even then as seen with Bangs and Merck licenses it would take 6 month to a 1 year before any significant revenue is seen. I think I’d follow Peter Lynch in “One up on Wall Street” would recommend waiting on this one a bit longer until there is more clarity. Especially when there are other opportunities in the market right now.

        I agree, a company with lots of potential but not enough runs on the board yet for me. Will keep an eye on it though. Hoping you are proved right in the end.

      • Nick Mason
        :

        Thank you for your thoughts Richard, as I stressed before this is purely a speculative investment and one saddled with considerable risks, completely unsuitable to the majority of this blog. Time will tell if it eventually meets investment grade criteria and I don’t expect that to be anytime soon.

  7. Ron shamgar
    :

    Hi,

    If we are talking pharmaceutical stocks, then an interesting one is Alchemia (ACL).

    They just received their FDA approval for the only generic version of Arixtra, which is an anticoagulant injection. Manufacturing Process is very complex (high barriers) and since it is the only approved generic, prices tend to stay high.

    They receive 60% from all sales by their partner, Dr Reddy, and are estimated to earn about $30mil in their first full year of sales. Current market cap is $140mil.

    The blue sky is their phase 3 trials of their cologne cancer drug. They will need about $20mil to conduct trials. They have $8mil in the bank.

    An interesting one to watch! I did mention it last year as the best speculative stock in this sector.

    Cheers.

      • Ron shamgar
        :

        Pete smith the CEO, has mentioned that they are looking to use debt with low interest rates from the US to fund the phase 3 trials until income from fondaparinux starts rolling in. It usually takes 2-3 months for sales to begin and market share reaches 40% very quickly. Prices tend to drop by only 20% as it is the only generic out there. So margins are extremely high.

      • ron shamgar
        :

        according to the company’s presentation material thats not correct roger.

        First generics typically gain market share rapidly after launch 30-60% market share
        Modest price discount to brand, generally ~20%

        if you have seen otherwise elsewhere, please care to disclose.

        Arixtra Sales:
        US sales to May 2011 = $340m (+16%)*
        Global sales 2010 = $461m (+16%)
        Used for prevention and treatment of deep vein thrombosis (DVT)

        Unusually high barriers to entry for other generics
        Off patent synthesis is extremely challenging
        Alchemia’s low cost synthesis is protected by issued patents
        FDA approval times increasing, average now >31months
        No FDA priority for competitors
        US data exclusivity expired 2008
        EU exclusivity expires 2012, filing in preparation

        thanks.

      • Ron shamgar
        :

        Roger, if you claim you know better than the company you should explain your reasons and back it up with evidence. Otherwise your opinion is no better then theirs. Cheers.

      • Roger Montgomery
        :

        I really am inclined to just say thanks for the advice Ron and all the best. I will on this occasion make the following observation: Quite obviously at this stage we (neither you nor I) know what the market share will be. You have, perhaps predictably, assumed I mean it will be less than 40% figure suggested by the company and quoted by you. Why have you assumed this? If X=’take up rate’ at 12-14 weeks (3 odd months), and my final market share estimate is that it will approximate 1.30(X), then market share could be greater than 40% if the take up rate is 30% at 12-13 weeks.

      • ron shamgar
        :

        thanks for clarifying Roger. in thats case we are both talking about similar numbers.

        time will tell if this company can prove the goods. but they deserve respect for delivering on their hard work. FDA approvals are hard to come by these days.

        cheers.

      • Andyc
        :

        All their cash is likely to fund their HA ideas, these aren’t protected by patent. I don’t see a great economic moat, since proceesses alone are not that strong. There appear to be various players who might have a shot at producing equivalent products, or substitutes, in the future. Tread carefully with Alchemia.

        My bet is still with Starpharma, they have a very strong patent position and a very attractive (read ‘risk adverse’) strategy in comparison to most biotechs. Their business model is yet to be proven by profits, so be very careful here too.

        Disclaimer – Long SPL

      • Ron shamgar
        :

        Hi Andy. Thanks for your feedback.

        Just to make it clear, neither alchemia nor acrux qualify as suitable investments for me.

        But I do enjoy identifying the ones I see potential in.

        I hope there is no hard feelings here.

        Cheers.

      • AndyC
        :

        Hi Ron,

        Absolutely no hard feelings, hope I didn’t give off the wrong impression here. (also hope you are reading the post I wrote?)

        I just didn’t have that much time to type my response but I recently bought Alchemia and sold on the day they jumped mainly because I discovered those aspects I mentioned (e.g. lack of patent protection for their HA product, which I was genuinely surprised by. And the fact that although ‘Fonda’ is hard to make it doesn’t constitute a super strong moat).

        I have been reading (or should I say, listening to) Pat Dorsey’s excellent book about competitive advantages. What struck me was that I have been falling into the trap of buying companies with exceptional prospects (and in most cases high ROE etc) but have neglected to look at how sustainable their advantage may be. E.g. some companies can have very high ROE and no debt, but when the storm comes, ROE sinks like a rock. Pat Dorsey highlights the idea that process based advantages alone are not as durable as, say, patents.

        For me, Alchemia doesn’t give me the confidence from a competitive standpoint (let alone the lack of profits) as you highlighted. I agree with you this is speculative investment territory. This blog post just came at the right moment for me to jump at this topic since it is an example of what I have learnt.

        Look forward to more sharing of ideas.

        Cheers,
        Andyc

      • AndyC
        :

        I like Pat’s style, very much a business analyst – the best way to invest.

        An interesting point Pat makes in his book, is that network effect can be a very powerful and lasting competitive advantage. I think the trick on this one is correctly identifying it!

    • Brian
      :

      Ron,

      Be careful about getting too excited over a generic. Arixtra has been around for years, and Warfarin is also used extensively to do much the same thing. (Prevent clotting in post operative knee and hip surgery patients) Their 60% share of profits drops to 50% if another generic appears on the market too. The oncology treatment is at least 2 years away from commercialisation if the trials go well. There will be some rattling of collection plates before that happens.

      Brian

      • Ron shamgar
        :

        Hi Brian,

        In not excited. The guy running alchemia is very prudent and is aware of not diluting shareholders. He has indicated cheap debt from the US.

        It is impossible for any generic to be approved in less than 3 years as it took ACL 2 years and they were allowed to file under an accelerated approval application which was meant to take 6 months. The FDA is extremely under staffed.

        The oncology drug is a huge market, so it is blue sky on top of income from Fonda.

        Cheers.

    • Ron shamgar
      :

      Currently the share price is under pressure as everyone are wary of a raising BUT if they are able to borrow cheaply then the shares will be re rated.

    • Matthew R
      :

      Hey Ron,

      Anticoagulants, something I have some experience with.

      Arixtra is an alternative to enoxaparin. Advantage is it can be used in heparin induced thrombocytopaenia (HIT). Disadvantage is that it can’t be used in renal failure. Unfortunately for Arixtra renal failure is very common and HIT is very rare.

      Clexane is the category killer in this space at the moment (daily dosing, predictable pharmacokinetics, demonstrated effectiveness). Heparin is used in some special circumstances but otherwise clexane dominates.

      What we really need is an oral alternative to all of the above. Currently the only oral option is warfarin but that is slow to reach a therapeutic level, requires continuous monitoring + dose adjustment, has many drug interactions and has it’s own complications.

      If a company comes to market with a viable oral alternative to clexane that will be the one to watch in my opinion. There are a number of options that have been published in the medical literature.

      Cheers,
      Matt

      • ron shamgar
        :

        thanks Matt. i respect your knowledge in this area. Arixtra has been very successful and has grown sales to about $360mil. now Alchemia will capture some of those.

        whats unique about alchemia now, is that they can actually fund themselves and their trials without going back to shareholders for more money.

      • ron shamgar
        :

        also they have looked into oral formulation, but i think they have put that on hold.

      • David
        :

        Pradaxa (dabigitran) is the new alternative to warfarin. No monitoring required, quick to reach therapeutic level. Oral formulation, no injecting required unlike arixtra.

      • Brad S
        :

        Hi All,
        Arixtra (fondaparinux) is expensive and is flagged on most hospital formularies (whether private or public) for very restricted use due to the cost and narrow clinical application. It is only really used in patients with known HITTS, and in whom warfarin is contraindicated, and hence Clexane (enoxaparin), a low molecular weight heparin, or standard sodium heparin are not market competitors. A generic, when released, would obviously make the prices cheaper for HITS management; but as this is a very rare condition, the demand for this product would be low.
        It is my belief also that Pradaxa is not approved for pregnant women, the largest patient category use for fondaparinux (pregnancy and HITTS), therefore, this oral warfarin alternative is not a competitor.
        In summary, the spectrum of clinical use of fondaparinux will not expand to encompass standard anticoagulation regimens, unless the generic is available at a lower price than that of commonly used low molecular weight heparins, otherwise the demand for fondaparinux is projected to be low.

        Brad S

      • Mal
        :

        Unfortunately, I don’t see much of a future for fondaparinux. There is no question that dabigatran is going to be enormous (disclosure- am a medical professional).

        There are a number of indications for oral anticoagulation (OAC- for which warfarin is example), but in terms of commercialisation the most common condition is non-valvular atrial fibrillation (AF), which is very common (I think roughly 1-2% prevalence over 65 years). On average, warfarin reduces stroke risk from 4% annually to 1% in the higher risk group (but the risks change in various groups). There are various scoring systems regarding use of anticoagulation in people with AF, but the upshot is the people most likely to benefit have lots of significant comorbities (diabetes, previous stroke, heart disease etc). The evidence for OAC is so strong that people are starting to shift to more aggressive scoring systems, where people over 75 should be anticoagulated. Just about every physician hates using warfarin- the people most likely to benefit struggle to make it to their blood tests, are frail and prone to falling etc etc. People have been crying out for an alternative to warfarin for years, but the problem is warfarin had been too good. There is clear evidence for clexane’s superiority to warfarin in the cancer sub-group, and warfarin is no longer used in this group. The big money will come in terms of replacing warfarin for AF.

        The RELY study tested dabigatran against warfarin and the results were phenomenal. (1) The higher dose (150mg) was superior to warfarin in terms of stroke prevention, with no increased bleeding risk. The lower dose (110mg) was non-inferior to warfarin at reducing risk of stroke, but had significantly lower bleeding risk. What this means is that lower dose dabigatran will probably be taken up very quickly in those people who would have benefitted from warfarin but probably have too high a bleeding risk. Eventually, in my mind there is no doubt that dabigatran will overtake warfarin.

        Moreover, due to the extensive costs of implementing warfarin effectively (INR monitoring, blood tests etc. and dosing difficulties), dabigatran will be cost-effective even with the significantly higher cost per tablet (2). There are a few agents about to come online as competitors (eg. apixaban), but dabigatran rightfully will have first mover advantage. Specialists and patients are waiting till likely commercial release of dabigatran later this year.

        Overall, I don’t see much of a future for fondaparinux, although it may play a niche role. Dabigatran will (in my mind) very quickly supplant warfarin use, and the good old rat poison will quickly become more and more obsolete.

        (1) Connolly SJ, Ezekowitz MD, Yusuf S, et al. Dabigatran versus warfarin in patients with atrial fibrillation. N Engl J Med 2009; 361:1139.
        (2)Freeman JV, Zhu RP, Owens DK, et al. Cost-effectiveness of dabigatran compared with warfarin for stroke prevention in atrial fibrillation. Ann Intern Med 2011; 154:1.

      • Mal
        :

        I should add- I don’t see a role for fondaparinux in the setting of non-valvular AF. The niche role that it has is for prevention of DVT in post-operative orthopaedic patients. There are studies (in highly controlled situations) that are starting to indicate that fondaparinux may be better than clexane (which is currently commonly used) for reducing DVT, but the downside is higher risk of bleeding (which surgeons hate) (1). This is why fondaparinux, which has been around for years, has never really taken off. The CLEAR role, is in patients who have a history of heparin induced thrombocytopaenia (HITS), where fondaparinux does not interact with platelets or platelet factor 4, and therefore does not cause HITS. The incidence of HITS on meta-analyses is roughly 2.2 percent (but with low-molecular weight heparin is probable substantially less). The overall market is therefore likely to at best be 0.5-1% of the post-operative market, and likely only in the case of second ‘major’ operation, which further reduces market, hence the niche role.

        Turpie AG, Bauer KA, Eriksson BI, Lassen MR. Fondaparinux vs enoxaparin for the prevention of venous thromboembolism in major orthopedic surgery: a meta-analysis of 4 randomized double-blind studies. Arch Intern Med 2002; 162:1833.

      • Rupert van Rooyen
        :

        Hi Mal
        Fondaparinux will not take off in Orthopaedics for the reason you state (bleeding)
        Dabigatran however, is being heavily pushed in this field…

        Disclaimer: Orthopaedic Surgeon and very reluctant anticoagulant prescriber.

      • Michael S
        :

        Hi Mal,

        I think that warfarin’s use will decrease significantly in the near future. There are GPs in my area changing people to Dabigatran already (prior to its listing on the PBS) with samples from the company.

        I am a pharmacist and I think we will be dispensing this one as soon as it lists on the PBS.

        Regards,
        Michael S

      • Andrew
        :

        Thanks Matthew, i found this post very interesting as someone who has had to have clexane used on him fo a short period and warfarin in the long term. The whole pharma industry is something that is outside of my circle of competence so i have little to add about any of these companys but the knowledge that has been shared by Matt and the others below have been great.

        Seems to be a lot of doctors going around that have a copy of value.able.

  8. Faye C
    :

    Just learning to use IV model ran ACR. To get your $3.09 for 2011 am I right is assuming you used POR 100% ROE 80% and EQ/Share $0.38. I ran mine using $0.33 diff could be second half profit est.
    2012 POR 100% got IV $4.16.
    Am I on right track

      • Kent Bermingham
        :

        Faye,
        You are onthe right track, Roger in a recent media post had ACR profits going from $68 Million to $42 Million to $61 Million.
        His IV was going from $4.55 to 4.76 in 2013 and rates this as an A1 company.
        Faye always err on the conservative side and make sure their is a big Margin of Safety.
        Hope this helps

  9. Jim
    :

    Hi Roger
    Thanks for your insights in this article. It is true that investing in this area has been frustrating, especially because of the takeovers if success is had.

    More recently though the pendulum seems, and I repeat seems, to be turning. The fact that Acrux is given an A1 rating, and has been an A1 for some time, is encouraging in itself. I know we’ve had COH and CSL for some time, but there are other ASX listed companies out there doing fantastic, world-leading work in the medical/pharmaceutical field. Looking forward to the new A1 service and seeing you at the Investment Expo.

    Cheers
    Jim

  10. Lloyd
    :

    Roger,

    Are the terms and conditions of the Axiron licencing agreement with Eli Lily in the public domain?

    I have not located any details of this key valuation determinant in the disclosures of ACR.

    This leads to the question as to how confident you are of a key underlying assumption that provides input the IV calculation (quote from the article):

    “If one assumes the company receives, say 20% of sales as a royalty – reflecting the fact that the deal with Eli
    Lilly was struck late in the development cycle and its product was well developed – then an annual royalty of
    $50–100 million per annum is possible.”

    Regards
    Lloyd

    • Roger Montgomery
      :

      Key word “possible”, not “probable”. 2012 will probably $25 million from royalties and perhaps $10 million from later stage milestone payments…More in 2013 and 2014. Generic gels then in 2014 but gels not as reliable at delivering correct dosage.

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