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skin ulcer trial- profit/ share price estimate

  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 are 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.

    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 times that of the USA .

    3. There are a variety of tumours. Let us assume that the profit before tax is about $400 per case or $280 after tax. Allow for 5% overheads, resulting in $270 net.

    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.

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

    6. Technically, EMI will execute the trial. NRT currently owns 95.2% of MEI . Assume that will be 90% in 3 years after a Commercial agreement has been signed.


    Assume that the trial is 100% successful-That need not be so; see (C)

    From A1: The number of cases of BCC and SCC 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 signing the Commercial agreement (D-DAY)

    From A2: This is for the USA only . Multiply by 2 to get the world's total or 1.68 mill. cases.

    From A3: NPAT: 1.68 mill. * $270 or $453.6 mill.

    Apply a discount rate of 20% over 3 years back to D-Day. The NPAT valuation at D-Day will then be $262 mill., of which NVGN will reserve 0.9*$262 mill. or $235 mill.

    Current number of shares is 97.4 mill. Assume that on D--Day, it will be 110 mill. So, the NPV after tax and overheads per share could be: $235 mill/110 shares, or $2.13 based on P/E=1. (See A6).

    At a P/E of 20, the NPV estimate is $42 per share, assuming that the trial is 100% successful.


    C.So, the question is, when will it be deemed to be successful. Obviously, the higher rate of rate of success will bring in more patients after the trial.

    Now if say 50% of the sample size were cured, that would be a good result as the most affected patients could take "the cure".

    However, a male with a small tumour on his back may think twice about using that drug, because there is a 50% chance that it may fail and thus he may then have to have the tumour cut out by whatever alternative means. This then could double the cost.

    On the other hand, a female with a tumour on her head will risk that chance and take the oral tablet.

    So at that 50% level success rate, males may resort to the knife, particularly if the tumour cannot be seen. Those with multiple or larger tumours may well resort to the Oral tablet.

    From then on, at much higher success rates, more patients wil use the tablet. Ideally, I like to see 75% and up.

    I want to add that a 50% success rate ought to bring in a lot of money anyway but it cannot be quantified that easily.

    We shall wait for the results before commenting further.

    Investors, please do your own research before deciding to buy, hold or sell any shares. There is no guarantee that the Skin Cancer Trial will be successful. This is a preliminary report.

    That is my opinion,

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