An earnings-based SP calculation

The deal with Vyera provides an opportunity for a back-of-a-napkin valuation of SP for CYDY as now we know how athe proceedings from Lero’s sales will be distributed.

The important question for this is: how much will CYDY get per patients treated for the sale of Leronlimab? If we had that number, the SP valuation as far as USA HIV could be determined with some accuracy.

In the bio-tech world this might be a fool’s errand as valuations sometimes account more for the POTENTIAL of accompany than for the drugs currently produced. Some can argue that CYDY should be worth some single figures right now. But, let’s go back to our valuation for Combo HIV:

Let’s start with Vyera and then see CYDY from the optics of Vyera:
assume the following:
Cost of drug $50K
COGS $13000 (26% of biotech average)
Royalties paid to CYDY 50%
Marketing expenses 20% of sales ($10K)
Vyera’s Operating income per patient =Sales-COGS-XSGA –Depreciation-Taxes
OI*/patient = $50K – $13K – $10K = $27K (disregarding depreciation and taxes as Viera has other products and CYDY should not be affected by these). Where:
XSGA:Selling, general, and administrative expenses
COGS:Cost of Goods Sold
We have then OI*/patient: $50000 - $13000 - $10000 = $27000
Of which Vyera will pay CYDY $13.5K
_______________________________________________________
From CYDY perspective we will get following assumptions:

Operating expenses ($60M approximating upwards from last 10-Q of $50.53M)
Royalties payable 10.5% (Progenics, AbbVie, CGS)
Milestones (assume we will be paid in 5 years) = $87M/5Years =$17.4M/Year
Taxes: Assume 21% once there is revenue
And we have for CYDY:
Revenue/year=(#Patients*$13.5K)*(1-0.105)+$17.5M
Earnings/Year: Revenue- Operating expenses – Taxes
Below a list of revenue and a theoretical SP with the biotech industry average E/S .

#Pat E/Share SP
____ _______ ___
1000 $0.0000 $0
2000 $0.0000 $0
3000 $0.0000 $0
4000 $0.0080 $0.26
5000 $0.0247 $0.8
6000 $0.0414 $1.33
7000 $0.0580 $1.87
8000 $0.0747 $2.4
9000 $0.0914 $2.94
10000 $0.108 $3.48
15000 $0.1914 $6.16

For example: Let’s assume we get a market penetration of 20% (VERY conservatively) for combo with 70K HAART failures and 70% (R5-HIV strain) = 0.2 x 70K x 0.7 = 9.8K (app. 10K)
Revenue/Year= $138.325M and
Earnings/Year=($138.325-$60M)*(1-0.21)=$61.876M
Now, if we assume a total of 572761293 shares (376756444 shares + 178591849 Opt+ warrants + 10K others + 7.413 M Preferred convertibles) we would have an Earnings/share of $0.108 and a theoretical SP of $3.48 as in table above.

Note: This is only an earnings-based SP calculation that in Biotech's is often not applicable, for example there are hundreds of companies out there with no earnings and none coming in the next 3 years commanding prices much higher than CYDY. Also I assumed very pessimistically that the contract with Vyera has it we half-pay for their sales and COGS, and we will receive from sales exactly what they do. We will know more when the appendix are published and could therefore fine-tune valuations.

Important here is that Vyera with approximately breaks even as far as milestones go (assuming that they pay them in 5 years) with app 1300 patients (again, I am not including their depreciation and taxes here). CYDY will have revenue from around 3500 patients.

The E/S multiplier was taken from:

http://pages.stern.nyu.edu/~adamodar/New_Home...edata.html

In conclusion: We are extremely undervalued !!. Just imagine if Mono is taken into account … The # of patients would grow rapidly and the earnings/share (dividends?) will grow accordingly. Imagine as well that Oncology where factored-in, CYDY should be trading in single figures right now even if only with the potential for HIV.