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if skin cancer trial successful, what value per sh

  1. 22,691 Posts.
    Estimating the value per NRT share following a successful Skin Cancer Trial.


    1. The latest update sets BCC at 1000,000 cases per year . The SCC is 200,000:

    It was reported that the events of both Cancers in the USA is increasing at a high rate. I'll set it at 4% per year compound for the next 4 years. Note that the 4% increments start as from 1 April, 2003. For the purpose of this exercise assume that the time from that date to the "high penetration date"--see (4)-- is 4 years.

    Assume that 60% of both BCC and SCC types will use the oral medicine at the time of high penetration--See (4).

    2. I don't have any data from Europe, Australia or anywhere else but would use a factor of 1.5 times that of the USA .

    3. There are a variety of tumours. Let us assume that the NPAT is about $400 per case.

    4. Should the Skin trials be successful, then (a) big Pharma(s) will simultaneously sell the product all over the world at the same time as is going to be the case with NV07A. I expect a high penetration in 3 years time after signing a Commercial agreement. Part of this time will be spent to prepare production, PR and discussions with Hospitals and Doctors.

    5. We don't know if there will be Fast Track. I have ignored that part preferring to use the Date of the Commercial Agreement as the base (D-Day). A discount rate of 18% will be applied in the 3 years after signing to the level of high penetration. I dont intend to use a NPV as we don't know the outcome of the trial. At the time of any Fast Track or the successful conclusion of Phase III, an adjustment can then be made.

    6. I have omitted any possible manufacturer's margin which could be gained by NRT.

    7. Technically, EMI will execute the trial. NRT currently owns 95.2% of MEI . That could change.

    8. A 30% tax will be applied and Company overheads would normally be brought into account.

    From A1: The number of cases of BCC and SCC in the USA will total 1.4 mill after 4 years since 1 April 2003. Now, 60% will use the orals and this involves 0.84 mill cases existing 3 years after "D-Day-See A5.

    From A2: Multiply by 2.5 to get the world's total or 2.1 mill. cases.

    From A3: NPAT: 2.1 mill. * $400 or $840 mill. after 3 years since D-Day-See: A5.

    From A5: Apply a discount rate of 18% over 3 years back to D-Day. The NPAT valuation at D-Day will then be $463.1 mill.

    From A7: Reduce this to $440.9 mill. Current number of shares is 97.4 mill. Assume that on D--Day, it will be 100 mill.

    At a P/E of 15, the estimate is $66 per share.

    At a P/E of 20, the estimate is $88 per share.

    At a P/E of 25, the estimate is $110 per share.

    That is my opinion,

    NB: Readers, please do your own research before making a decision to invest. There is no guarantee that the Skin Cancer Trial will be successful.


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