1. I used the Total Addressable Market (TAM) from Life Science Capital - LSC (see post 30901 for a quick reference). What I did was look at each indication separately, HD, ICU, Oncology for total yearly CD (Catheter Days) and treated them all differently which I will elaborate on below.
2. I assumed a very modest 2% growth in CD starting with the 2021 numbers. Therefore leaving the LSC numbers as is for my starting point in 2020 (yes conservative). The 2% growth was for all indications.
3. I assumed that the FDA granted only the HD indication and that Neutrolin was approved for sale sometime in Q4 of 2019 due to being granted the LPAD path.
4. I assumed that CRMD would capture 50% of all HD CD in 2020. Normally that high a share is unheard of for any drug but because of many factors such as no current SOC, high infection rate, excellent trial results and most importantly 2-3 major corporations running in excess of 50% of all HD Centres in the US and that those same centres were part of the trial, this gives me confidence that 50% usage in yr 1 is doable for HD.
5. I assumed that yr 2 the capture rate would be 75% and that yr 3 it would be 100% again only for HD.
6. I assumed a selling price of $15 net of any incentives to distributors or large buying groups. I kept that price flat for all 10yrs not even increasing it by inflation. I believe this selling price is very low as what I have been able to find on-line is that the cost of Heparin Flush sells to hospitals for just below $10 in the US (note some have shown the cost of Heparin in Germany or Europe to be much lower, but this is only US Based). I'm sure that even with massive discounting, they do not pay less that $6-$8 for a vial of Heparin Flush. A very important point to not forget here is that once Neutrolin gets approved and starts to sell, Hospitals/HD Centres will no longer have to use Heparin as it is a component of Neutrolin. So a key benefit is that as the hospitals/HD centres/payers/insurance/etc look at the cost of Neutrolin ($15 in my example) the real cost would be $15 minus what they were paying for Heparin presently, about $6-$10. Do not forget that there have been many calculations done showing the cost of all these infections to the health care system and they have been close to $10 Billion dollars yearly. Therefore, with 444 Million CD, a breakeven price point is just below $20, but since Heparin is already used and will be eliminated, the breakeven price is actually around $25/vial. So it could be argued that $15/Vial is quite conservative a number.
7. For the ICU indication, I assumed that either CRMD or an acquirer would run a phase 3 and would be in market starting in 2022, 3 full years from now. Again quite conservative as the FDA may not even ask for additional trials or maybe just a Phase 4, but again better be safe and calculate another Phase 3 trial. Also, I chose the ICU indication as it had the lower of the 2 remaining indications for CD and again it would show a smaller total revenue earlier. For the ICU, I estimated 25% capture in 2022, 40% in 2023 and 50% in 2024 until 2029 for the ICU indication. I only calculated a 10 yr projection with the 10.5 yrs of exclusivity due to QIDP. Not to say that they will not be able to continue selling Neutrolin but again just being conservative.
8. For the Oncology Indication, I again assumed that they would need to run a Phase 3 trial and that they would start selling into that indication only in 2024, 5 full years from now. I kept the same capture rates as I did for the ICU with 25% in yr1, 40% in yr2 and 50% in yr3 and beyond all for Oncology.
9. I assumed NO OFF LABEL USAGE.
10. I assumed a 75% Gross Profit Margin until 2023 and then 85% thereafter
11. I assumed a 40% EDITDA Margin until 2023 and then 50% thereafter
See attached image for what these assumptions yielded. Remember, all figures are in '000's
We all should be patient with this investment. With what I believe are quite conservative assumptions, the total cumulative 10 yr revenue adds up to $25.8 Billion. Yes, that's a B not an M. Profits would be over $12.7 Billion. Remember that if they get acquired, the profit number should be much higher as the additional cost to the acquirer will be significantly lower than what CRMD will need to spend to sell Neutrolin into the Health Care system.
I could have provided a DCF model and made another dozen or more assumptions and showed what this would be worth to an acquirer. Suffice it to say, the FDA meeting and results from it can make this jump incrementally. After that, it's anyone's guess as to what this will be worth.