Tuesday, April 15, 2008

NNVC Valuation

NNVC is a more compelling buy today at $0.65 then it was when I first mentioned it here at $0.10, before it ran to $3.75. Then, it was pure speculation. Now, it has taken its first steps as a genuine biotechnology company. It is only because of it's "developmental" label that the shares are still available under a dollar. The risk here is $0.65, what is the reward?

Rather then reinvent the wheel, I am going to use the analysis of another NNVC shareholder, a prolific poster on the IHub, NNVC forum (which has an excellent overview of NNVC).

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Some basis for a future valuation of $200 a share

Looking 5 years out:

If all goes well in the next 90 days, the first pre-NDA will be filed before the end of the year and the NDA should be approved in the first quarter 2009. The first NDA will probably be the topical nanoviricide EkcCide. That should be a rapid approval of not more than 5 years and probably closer to 3. It will be fast-tracked and given compassionate use status if it in any way reverses EKC blindness. That is a billion dollar a year market just in Japan, and $5 billion world wide. Viral pink eye expends the market from there.

HiviCide will also get the fast track after the first round of animal studies and confirmation testing. Again compassionate use will enter following NDA status and Phase 1 trials. Look at how quickly other very toxic treatments were approved to get an idea of how quickly NNVC will receive approvals if the stuff is effective at controling HIV viremia. By 2013 it would be fully approved for a $2 billion market.

Ebola, Dengue and other military/defense hemorrhagics won't need FDA approval for stockpile. Still, looking 5 years out, my estimate based on other stockpile drugs would be in the $500 million a year range to maintain each application. DengueCide would actually have a market in 5 years as it has turned epidemic again.

FluCide and AviFluCide, eventually a $5 billion market for critical care patients who cannot be vaccinated or for whom vaccination will not be effective due to weak immune systems.

So, if all goes well, in the next 5 years, I estimate that annual gross sales for nanoviricides will begin approaching $12 billion a year with NNVC taking 17% to 20% of that (to be conservative). There would also be 2 $500 million drugs entering the market every year, which would add to the capitalization.

So, assuming a worse case scenario of another 20% dilution over the next 3 years (same as the previous 3 years) that would result in about 142 million shares in the o/s, but lets round that up to 150 million shares. So, 150 million shares with income of 2.04 billion a year times a 20X market cap yields 40.8 billion cap or a share value of $272 a share. I think $40 is a little low. This is why some posters keep saying $200 a share, which is probably low since my numbers are on the low end.

Recently,Takeda Pharma bought out Millinium Pharma for $8.8 billion. Millinium has only one drug with projected revenue for 2008 of $345 million with small income growth for the next several years. I'll repeat, a company with a $345 million income, with moderate projected growth was capitalized at 8.8 billion. Makes me wonder if my $200 a share isn't off by an order of magnitude.

However, all of the above assumes that EkcCide will be effective against viral EKC, and HIV can be controlled by a topical teratment with a skin patch. None of this is yet proven, but our docs haven't been wrong yet.

Link

A

15 comments:

Anonymous said...

you are right--the risk is .62 but the $200 is so full of assumptions and ifs, that it must be categorized as the perfect world and unfortunately we don't live in a perfect world. It is so naive and typical of hypesters that have a different agenda. beware the hypesters cause as they hype the stock sinks which should tell you something.

Allan said...

The valuation is based on taking a pencil and paper to the products in development, markets for those products, gross revenues and market capitalization. In other words, $200 was not a wild guess, it was a rational guess. It may be way high, or it may be way low.

A

Erin O'Brien said...

Here's the real story behind Leaving Las Vegas.

Anonymous said...

How can a company with just two employees be taken as a serious investment? I am more than happy to make money in this pyramid scheme of a fraud in hit and runs raids on daytrader fueled surges, but I feel sorry for anyone deluded enough to think this is a "real" company worthy of a buy and hold "investment."

Anonymous said...

$5,000,000 of government funding in May of 2007 from a Senate Armed Services Committee defense authorization bill for FY 2008 and a joint R&D effort with the United States Army Medical Research Institute of Infectious Diseases... I fail to see your point that the company cannot be taken seriously.

Anonymous said...

The feds do very little DD on who gets grants under their small contract research program. Basically, anybody with an idea to cure a dread disease, a research MD, and hires a professional grantwriter can get $$ thrown at them. I am sure this $5 mill keeps their 2 employees (CEO and pal) living in style. I am not saying they could never turn out to be something, I am only saying caveat emptor (sp?). I have been suckered into thinking these "shell" companies are real buy and hold long term investments far too often.

Nigel said...

Allan said :"The valuation is based on taking a pencil and paper to the products in development, markets for those products, gross revenues and market capitalization. In other words, $200 was not a wild guess, it was a rational guess. It may be way high, or it may be way low."
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Anonymous said: "How can a company with just two employees be taken as a serious investment? I am more than happy to make money in this pyramid scheme of a fraud in hit and runs raids on daytrader fueled surges, but I feel sorry for anyone deluded enough to think this is a "real" company worthy of a buy and hold "investment." "
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I must say that I come down on this issue with the anonymous poster, simply because one cannot ever trust these proto-typically pumped and dumped, perfectly alighed chart patterned, non-fundamentally proven companies to be anything but pure speculation when everyone with any inkling of trading sense knows that each and every one of these stocks follows the same pattern. Months and month, sometimes year and years, and even at times days and days of perfect movement, and then all of a sudden just as it really gains ground, BOOM....The rug is pulled, anyone and everyone invovled on the inside is gone, selling heavily into the rush of liquidity that was all the while their only goal to create. Although personality wise he is extremely defunked of any rational, reason, and respect, Timothy Sykes (timothysykes.com) in his blog and website has detailed these typically disasterous schemes over and over in a very accurate manner. It is actually the basis on which he turned $12,000 into $2 million, going long these pump and dumps, and then seeing the turn and shorting them with impunity. See these typical chart patterns. They reapeat over and over and over...

http://www.investorslive.com/blog/2008/04/four-what-goes-up-must-come-down-but-when/


Allan, while your framework in which you place this and other micro-cap speculation vehicles is COMPLETELY sound, solid, and well researched, the final analysis cannot be on trusted or perceived on the same level as something 'normal', I.E., APPL or anything of the kind. More power to you if you have to guts to "invest" in these vehicles, making money is great and if it suits you I am all for it. But in my personal opinon, these must be seen for what they really are 999/1000 times, which is an ellaborate investment scheme in which companies hire materially significant marketing campaigns to flood investors with stories, ideas, facts, balance sheets, products, videos, magazines and on and on and on in anyway they can produce the desired affect. Volume purhchases. They have a desired dollar target at which they are allowed to legally dump the stock, and as soon as they can, they almost always do.

Regards,
Nigel.

Anonymous said...

Well spoken, Nigel!

Allan said...

Nigel, this company has not engaged in a, "materially significant marketing campaign," nor anything close to it. In fact, the failure to aggressively promote the company and it's science is a frustration that is shared by many NNVC shareholders. That doesn't in and of itself guarantee $200 a share, but it distinguishes NNVC from the pump and dump model you have described.

As for Tim Sykes, isn't he the kid who had to drink vodka from his pocket flask in the green room before he could get up the courage to appear on CNBC for an interview? And didn't he subsequently run his hedge fund into the ground? I don't think I will be drinking any of his kool-aid anytime soon.

A

Nigel said...

Allan-

I guess if one wants to skirt the issue, or in other words, the reality of the investments we committ our capital to, we can all look for reasons to buy a stock, whatever they are, and reasons to sell a stock, whatever those are. Ultimately, the point is not that we disagree, or that I do not respect your view point because I most definitely do( I love the blog), however, the real point is that these companies act in the ways they do not because they fit any rational fundamental structure of which you seem to be attempting to apply to these vehicles in many instances, but that these companies act in the ways they do because as I said before, 999/1000 micro-cap/low float vehicles exist purely as their own independent business model having nothing whatsoever to do with the stock market. If one chooses to commit capital to this specific marketplace, one MUST realize how incredibly large the sums of money are which are made by the 'company officers', 'marketers', and 'scientists' in these schemes. The problem is that this profit has nothing whatsoever to do with the success of that business, it has to do with the fact that they have sold you their shares, which they created out of thin air at zero cost. All they have to do is 'give them value', or in other words create the environment in which investors such as yourself access the available materials by which to become a supporter of the share price. It is incredibly impressive, yet at the same time defunct of any moral capacity, as well as honest business growth and or potential. Because it looks good, somone buys on the inside, news comes out, a TV feature is done, whatever the case is, it means absolutely nothing. If your goal is to invest only on the pump side then I am all for you, and most likely you could learn a great deal from Tim Sykes(yes he is a complete jerk), afterall he did turn a measly 12K into 2 mil and he is doing it again. If your goal is to short the dump side, then again, more power to you and I am all in support of your efforts, and again, their is much to learn from Tim Sykes as his first million was going long of pumps and his second million was getting short of dumps. You mistake my reference as an endorsement, this is hardly my intent. Timothy Sykes is a cynical, rude, immature little boy, however even someone like me who hates everything he represents socially, can admit that he has figured out how to expose this rather misunderstood market inefficieny. There are two people on the side of every trade, and because a stock goes up does not mean it is viable, it simply means there are more buyers than sellers, and that alone has nothing to do with the viability of a business model, especially when it must constantly be defended via large block program trades, constant marketing which in most cases will eventually reach a materially significant capacity before the dump occurs, and most of all insider buying. The float is incredibly low as well, and manipulated constantly. All of these aspects lead informed traders to one of the following two possibilities, and there are only two. The first is that a trader will buy into the vehicle knowing fully well what they are getting into, when to get out, and what signs to look for when this time occurs. The second is that a trader gets short of the underlying vehicle, knowing fully well what they are getting into, when to cover, and what signs to look for when this time occurs. It is not complicated, and when someon tries to make it so, it just stinks even more of a pump and dump. That terms is negatively associated with many bad things about the stock market, but in reality it is no different than a 'bull trap' a 'bear trap' or the head fake we have all fallen victim to at one time or another.

All I am saying is that treating these particular stocks as tried and true worthwhile fundamental investment models is entirely illogical, if not dangerous. This is not to say that one cannot have success doing it, as you have shown, but simply that many people do not have the time, knowledge, or expertise that you have, and therefore cannot treat these vehicles are you wish to. Fiscally, it just does not make sense for anyone to do that as they are likely to get burned and I hate to see that happen because they have read an 'offical company release' that was just typed up by a pimple-faced 23 year old graduate with a BA in marketing about this science research or that product development, leading them to put their hard earned money where it should never go...The uknown.

Aloha,
Nigel.

Allan said...

Nigel,

I don't mind if the founders of NNVC get filthy rich off of the stock. Nor do I care if said wealth comes from the discovery of a miracle virus treatment, or ten, or from a baseless appreciation of their shares in NanoViricides. All I care about is taking advantage of what I perceive as a golden opportunity here.

When first recommended this stock, it was between 8 and 10 cents a share. Thanks to the Bird Flu scare a couple of years ago, it ran to $3.75. Some of my blog readers claim to have made a six-figure profit on that move. And yet the company was much less developed as was their product at that point in time. Two years down the road, NNVC is getting some positive testing results and interest from "reputable" institutions.

We all agree that this is not, as you suggest, based upon, "tried and true worthwhile fundamental investment models". It is based upon greed, which you might agree, has it's place in speculation.

So tell me some Longs that you like here, or for that matter some Shorts. I am curious as to where your own investment tastes lay.

A

Singlengle said...

Do you read about Nanotech ? XDSL had an interesting day friday. Wondering what you might think here.

THANKS

Cruiseguy said...

Allan, Why no new posts? Lots of money being made...

EZCH on a 70% run. ARWR and NTRZ, not doing much. NTRZ has had some interesting managment moves....is this still being trumpeted as the best stock of 2008?

Cruiseguy

Anonymous said...

the company now has 10 employees and is looking to expand to 100 as soon as they find a suitable facility ... just to answer you comment about it only having 2

Anonymous said...

The company seems to have come into existence in a rather strange way and it's relationship with Theracour is less clear. Also they have made wildly optimistic projections a few years back while working with Vietnam. And long term safety of nanoviricides is something that has to be studied. The interest from CDC, dept of defense and other research institutions are good signs, but it still seems there is a long way to go.