Yes, that's right. Here's a simple back of envelope triangulation with the market cap and my valuation, which you've read correctly .
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This isn't how I've valued it on SM, but it is a simple M&A case:
Revenue: $450/month net/patient = $5,400/yr/patient
Market: Case 1) 10m AHh in US; Case 2) 7m diagnosed
Peak penetration after 4 years = 1% gives: Case 1) 100,000 patients and Case 2) 70,000
M&A Valuation Case: Estimated peak sales acquisition multiple for a growing product is 5-10x, but we'll use 2-5x assuming moderate product market fit and peak and limited growth beyond 1% penetration. Case a) 5x and Case b) 2x.
SOI: 1,817m
USD:AUD = 0.67
Valuations (combining 1&2 and a&b)
1a) $2.22; 1b) $0.89; 2a) $1.55; 2b) $0.62
Average $1.32 ($0.62 - $2.22)
This is a different method than my SM valuation method, which was driven off some simple financials. (An example of triangulating using completely different methods.)
The BIG uncertainty is the number of patients that try the drug, and then those that stay on it.
QBREXA - the existing anticholinergic
As a bright spot, ever since Journey Medical bought QBREXA off Lilly, and have stared giving it some focus, there has been renewed momentum. In Q3 they added 4,000 new prescriptions over Q2, which in turn grew by 1,800 over Q1, with the drug having only increased 6% in 2023 over 2022. It's hard to know what the total sales of QBREXA are, because it was not given much attention when it was in the Lilly portfolio. I suspect they're not great otherwise they'd be giving more transparency.
However, Journey Medical has mulitple products including products in development. So they've had to allocate capital carefully to multiple demands. In Pharma, products don't sell themselves, and so I posit that neither Journey Medical nor Dermira before them gave QBREXA the focused attention that SOFRDA is getting from $BOT.
Journey Medical only has a market cap of US$116m and sales of US$80m across a portfolio of products, and if it starts generating new scripts at an annual run-rate of 16,000, then that's starting to look promising.
QBREXA is a cloth wipe-on and I think you have to wear gloves when putting it on, or at least wash hands afterwards, so SOFRDA's applicator is likely to be more patient-friendly. We don't know how the efficacy compares head-to-head.
Lilly only acquired DERMIRA in 2020 to strengthen their dermatological presence, and for them to sell QBREXA to the minnow Journey Medical a short time later clearly indicates it didn't fit with their strategic priorities. But of course, over that time Eli Lilly's fortunes have changed. In Q3 Lilly's GLP-1s achieved quarterly sales of over $4bn. So their appetite for lower value products is now in a different league!
ECCLOCK ( SOFDRA in disguise in Japan)
According to Euroz Hartley, ECCLOCK (essetially SOFRDA being sold under licence in Japan by Kaken) in year 4 sold 350,000 units, or the equivalent of 29,000 patients, taking it for a full year. While the drug is a lot cheaper in Japan, the reimbursement and health insurance set up is different. And Japan is a market only 1/3rd the size of the US in terms of patients (and a lot smaller in $ value).
So, translating 29,000 in year 4 in Japan to the US indicates that 70,000 - 100,000 is ballpark realistic. (That said, there is some evidence that the prevalence of AHh is higher in Japan than in the US, however, it can be hard to unpack the stats between all hyperhidrosis conditions, the axilliary condition, and primary and secondary conditions.)
The big difference between the markets, is that the US market has direct to consumer marketing, and a telehealth diagnosis, presciption and fulfillment channel all good to go. Backed by a very experienced management team with a great track record. So, is 1% market penetration aggressive or highly conservative? Take your own view, and the valuation of $BOT follows as a result.
SO WHAT?
My valuations for $BOT - by whatever method - are optimistic. They represent successful commercialisation. I am assuming a good product-market fit, and successful sales and marketing execution.
But if both of those things happen, then >$1.00 might only be the start.
And that's why, despite its execution risk, $BOT is my #2 real life position. From here, it has a very significant upside, but it could also flop and go to $0.10!
The great news, is I am going to find out over the next 12 months. It is possible that in 12 months time my valuation is either $0.10 or it might be $2.00, There are few if any stocks I own with that spread. But anyone who owns $BOT has to embrace that risk IMHO.
(Sorry @umop3pisdn you asked a simple question, and I've gone into a deep dive. But to me the number in a valuation is the result of a lot of thinking about the business and the market, and inevitably, when I start unpacking my numbers, a bunch of other stuff pours out. And if I haven't written it down before, then I tend to dump it in the Straw or Post of the moment.)