Much to the delight of Hemispherx BioPharma individual and institutional investors, a reader and follower of StocksHaven Investments has evaluated the Price Per Share potential should Ampligen see FDA approval within the coming weeks.
The following article has been submitted by an investor named, Ace Spader
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The much anticipated FDA decision on the Hemispherx Biopharma, Inc. drug Ampligen has held a large audience of traders glued to their computers while tirelessly posting rants and raves in various trading forums across the web. Some of the most popular topics have included wild conspiracy theories surrounding the dilutions by the company and the delays by the FDA. Others have postulated about all of the potential uses of Ampligen in the future with a particular emphasis on the pandemic flu.
Of all the topics seen and discussed recently, there is one that continues to resurface multiple times each day leading up to the FDA decision:
“How high will the HEB price per share go once Ampligen gets approved?”
This topic differs from the others in that we can come up with a result that is backed by facts, logic, and conservative estimates rather than just pure speculation. Out of my own curiosity I decided to tackle this problem. I believe my results will prove to be right on the money. My analysis calculates an estimated pps for HEB in the weeks following FDA potential approval of Ampligen to treat CFS patients in the US. We cannot predict what other events will occur to cause the pps to go higher or lower in that time frame, so I will just focus on the impact of this individual event.
The Formula:
- ((Total Customer Base * Annual Revenue Per Customer * Possible Market Penetration * Net Profit Margin) / Cost of Equity) / Number of Outstanding Shares = Expected PPS
I performed some extensive research to come up with fair estimates based on real world information for each of the variables in the equation. I then scaled the variables to come up with a conservative estimate. This is not an exact science, and some of the values could be quite different from what I have decided to use. However, by making an effort to err on the conservative side I can reduce the effect of errors that might be introduced by potentially inflated numbers found in my research.
The numbers found in my research:
- The generally accepted number of people suffering from CFS in the US is 4,000,000.
- Of those 4,000,000 about 20% are the cases that would be considered for treatment using Ampligen.
- In a recent survey of doctors over 50% said they would likely change their prescribed treatment for CFS once Ampligen was approved. I chose to use a more conservative estimate of 35%.
- The annual cost of Ampligen treatments is $14,400. I chose to use a much lower number $4,800 which is 33% of the known cost to account for potential economies of scale and to err on the conservative side.
- The number of outstanding shares at the time of my analysis was 110,670,341. This was taken from the most recent SEC filing.
- At the time of my analysis the average Beta for HEB was 0.87.
- The risk free rate is 0.0013. I used the 3 month T-bill rate found on Bloomberg.
- The market’s historical excess return rate is 0.067.
- I calculated the Cost of Equity using the CAPM formula: (Beta * Market’s Historical Excess Return Rate) + Risk Free Rate = Cost of Equity. I then doubled the result to once again err on the conservative side. The resulting calculated Cost of Equity was 0.12.
The Variables:
- C: Total Customer Base = 4,000,000
- R: Annual Revenue Per Customer = 4,800
- P: Potential Market Penetration = (20% * 35%) = 0.07
- N: Net Profit Margin = 0.15
- E: Cost of Equity = 0.12
- S: Number of Shares = 110,670,341
The Equation:
- ((C * R * P * N) / E) / S
- ((4,000,000 * 4,800 * 0.07 * 0.15) / 0.12) / 110,670,341 = $15.18
The Results:
- A conservative estimate for the PPS of HEB shortly after news that Ampligen has been approved by the FDA is $15.
The Sanity Check:
One could argue that there is simply too much room for error for this result to be meaningful. After All I did make choices to scale some of the numbers found in my research in order to come up with a more conservative estimate. And, the raw numbers found in my research might also be flawed. For these reasons I decided to perform an additional analysis to come up with a range to account for estimation errors.
I applied the same formula to VNDA and TTNP using data from before the FDA approval of the drug Fanapt in order to gauge how accurate my estimate might be. The common business realities between Vanda Pharmaceuticals (VNDA) and Titan Pharmaceuticals (TTNP) allow me to apply the equation to both stocks using mostly the same values for key variables in the equation. This allows me to treat the common variables as constants thereby reducing variances caused by erroneous estimates. In simple terms by having less variables to adjust between the two calculations a more meaningful variance can be found. As it turns out there are only two variables that have different values between the VNDA calculation and the TTNP calculation, and one of those variables is the number of shares which has no room for error since it is a known number.
VNDA Calculations:
- C: Total Customer Base = 2,000,000
- R: Annual Revenue Per Customer = 7,900 (Market is 15.8 billion in US / 2 million customers = 7,900)
- P: Potential Market Penetration = 0.028 (Competing with 6 other drugs. Target customer base = 14%. [0.14 * 0.2 = 0.028])
- N: Net Profit Margin = 0.15
- E: Cost of Equity = 0.24 (Beta for both VNDA and TTNP was roughly double the Beta of HEB before the approval of Fanapt.)
- S: Number of Shares = 26,650,000
Predicted PPS = ((2,000,000 * 7,900 * 0.028 * 0.15) / 0.24) / 26,650,000 = 10.38
Known post approval peak PPS = 14.79
Difference between peak PPS and predicted PPS = 14.79 – 10.38 = 4.41
Deviation from predicted pps = 4.41 / 10.38 = 42%
TTNP Calculations:
- C: Total Customer Base = 2,000,000
- R: Annual Revenue Per Customer = 7,900
- P: Potential Market Penetration = 0.028
- N: Net Profit Margin = 0.08 (This number was disclosed.)
- E: Cost of Equity = 0.24
- S: Number of Shares = 58,290,000
Predicted PPS = ((2,000,000 * 7,900 * 0.028 * 0.08) / 0.24) / 58,290,000 = 2.53
Known post approval peak PPS = 1.70
Difference between peak PPS and predicted PPS = 2.53 -1.70 = 0.83
Deviation from predicted pps = 0.83 / 2.53 = 33%
The Results:
The average percentage deviation from the predicted pps is (42+33)/2 = 37.5%. Using this information I can now apply a range of roughly plus or minus 40% to my HEB predicted pps of 15.
Lower limit = 15 * 0.6 = 9
Upper limit = 15 * 1.4 = 21
In Closing:
My analysis shows that the PPS for HEB will peak somewhere between $9 and $21 within the first few weeks given that the FDA approves Ampligen for treatment of CFS. It is important to understand that there are other potential uses for Ampligen on the horizon that could easily push the PPS beyond the conservative range that I have calculated. The most promising of these uses is the use of Ampligen as an adjuvant for influenza vaccines on a global scale.
I believe my analysis is very conservative, so I would not be surprised to see the PPS reach the upper limit of my range. And, if any other positive news comes out for HEB it could go beyond my calculated range later this year. I will be setting my sell limits very high, and I am long on HEB. I hope you all enjoyed reviewing this analysis, and hopefully you will find this method useful for other stocks in the future.
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Author Bio:
Ace Spader is a freelance web developer based in Chicago, IL. He has a BS in Computer Science from Northwestern University. He has no formal background in finance. Other interests include poker, singing, science and technology. He recently started a stocks related private Google group called Farseers. His future plans include developing useful online tools for organizing and sharing information on stocks
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Disclosure: Long-Term Position
The formula used in this analysis was provided by Mohammed Miah, a graduate from University of Manchester and a B.A. in Economics with a focus on Finance.
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By reading StocksHaven Investments you agree to the disclaimer, and thereby will not hold Michael Vlaicu accountable for any transactions or decisions you make. It is up to you to do your own due diligence.
Thanks Michael for posting Ace’s analysis on the possible PPS for HEB once the FDA approves Ampligen. The more news on HEB, the better for all of us. Thanks again!
Very good analysis. This will put a lot more faith into investors. Thank you for taking the time to do this. Much appreciated… God bless
Nice job on the evaluation for HEB. Definately I’m a long term investor for this company.
Can you do something on CTIC response against Adam F from yesterday’s bashing?
[...] Originally Posted by kmlee Broke 1.75, amazing… because someone has come up with post approval HEB PPS here: Post Approval Hemispherx Ampligen PPS Evaluation | [...]
Nice job on the evaluation for HEB, but your analysis fails to account for the prospect of overseas orders, namely by Japan as well as other foreign governments. Hence, I tend to be more bullish on the PPS valuation than say even $20. Great job nonetheless!
You are very close to the money. It would have been even much higher by now if Madoff’s company thestreet.com stops publishing false reports.
Thank you.
If this stock gets approved stocksheaven will get a big donation from us investors. I’ll post this everywhere. We have theStreet.com on one side killing this stock with malicious false news. Guys please think about making donation to these guys, they are fair and truthful in their analysis and news.
You can click on the donate button above and do so. Please…
Thank you very much!
I knew there was a good reason I set this site to My Favorites.
Thank you everyone for the positive response. This represents the progress StocksHaven Investments has made in a short period of time, along with it’s community of individual investors and readers.
As we continue to grow, and the more additional analysis we receive the more success as individuals we will garner.
Please provide biographies, pictures, links to any articles you submit so that StocksHaven can help you, as you help us.
Thanks,
Michael
This is just as blatant a pump as Feursteins’ article was a dump and just as irresponsible to publish.
I now consider stockshaven to be untrustworthy, why even give the person a name “Ace Spader” why not say “several sources”, thats equally as vague but with a touch more mystery.
I’d be surprised if this isn’t just a gambit to draw eyeballs to this small site.
Dear C. R. Brown,
Why bash when you missed your opportunity to buy lower yesterday. This is no pump, but a careful analysis of where the PPS may go following the much anticipated FDA approval. I hope you get your wish to buy low as it makes no difference to long HEB investors like me if the interim PPS gains or drops. Cheers.
[...] pleno el informe especial sobre la empresa parece hoy en y precio estimado tras aprobaci
Thanks for the comments. And thanks Michael for publishing this so that many investors can mull it over and give it some careful consideration. We are in an amazing time to be investing with so many great opportunities to buy low. I feel HEB is one of the best opportunities in the market right now to make both short term and long term gains. It was my pleasure to be able to crunch the numbers in a meaningful way in order to gain some insight into the real market potential for this company.
You’ve got a great website going here Michael. Best of luck.
Ace
[...] guy has put a $9 target on HEB here, the math looks questionable, but I don’t believe in imaginary numbers. Nevertheless, the [...]
Please note that Ampligen won’t be infused, but will be delivered intranasally as a treatment for the influenza pandemic.
[...] denk dat er meer aan de hand is dan gewoon een paar positieve (subjectieve) nieuwsberichten. Post Approval Hemispherx Ampligen PPS Evaluation | <- Interessant berekening voor mogelijke valuation na approval. Nu hopen dat die approval er [...]
[...] geplaatst door MadisonAv Click Interessant berekening voor mogelijke valuation na approval. Nu hopen dat die approval er komt. En [...]
@Jeffry, The correction has been made, thank you for the notice.
Ace spader lol, now there is a name that doesn’t have to worry about being tracked down when people lose their money. Every day the pumpers are finding ways to mischeve the public so they can prey on their money like a thief in the night. Isn’t it always so convenient that they always come out of the woodwork after a stock has taken off and claim that if you only would have listened to them. This is a warning people the old saying goes here buy the rumor sell the news and I mean if and when the FDA approves hebs cure all vaccine you better have your shares cashed in or someone will make their value alot less than what it was when you bought it.
This company has a history of fraudulent promotion of “Ampligen” going back 35 years! Years! Doesn’t anybody do their homework? In those 35 years, HEB has never booked any significant revenue. Every few years they jump on the back of a new pandemic scare and the price spikes. FDA approval is meaningless if the drugs don’t work, and they’ve already had 35 years to prove they do.
Thanks Ace and Michael. I have never made so much money so quick! I’m now playing with $10K of house money in HEB. Thanks for the advice.
You are using a profit margin of 8% for Titan.
Their royalty agreement specifies 8% of the first $200M of sales and 10% of the sales in excess of $200M.
Accordingly, you need to correct your TTNP price projection.
[...] Post Approval Hemispherx Ampligen PPS Evaluation [...]
Hi,
I tried to add image but I don’t know how to do this
Can anyone be kind to tell me how?
thanks a lot
Truly efficiently set.
I’ll immediately seize your rss feed as I can not to find your e-mail subscription link or e-newsletter service. Do you’ve any? Please let me know so that I may subscribe. Thanks.
I think the S and R are both larger, but the prediction still holds.