tag:blogger.com,1999:blog-3524696061872254323.post7272477422205604571..comments2023-05-29T03:48:06.258-07:00Comments on The Picky Investor: 300% Return In Two Weeks - Is Dendreon a Bubble?Henry Beehttp://www.blogger.com/profile/12176365362835822750noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-3524696061872254323.post-7217798596396667092007-04-09T11:42:00.000-07:002007-04-09T11:42:00.000-07:00For the discount rate, I always keep it the same f...For the discount rate, I always keep it the same for all companies. I like to use the long-term 30 year T-bill yield. But since we're in a low interest rate environment right now, the yield is below the historical average. Hence, I'm using the historical average T-bill yield which is 8% for my discount rate. Out of the numerous DCF I've performed on various companies, I rarely find an 8% discount rate to be too aggressive.<BR/><BR/>For the inclined readers have a look at <A HREF="http://www.leggmason.com/funds/knowledge/mauboussin/CommonDCFErrors.pdf" REL="nofollow">Common DCF Errors</A>.<BR/><BR/>As for the other comment about 100% market share assumption, I can clearly say that is not the case. The market penetration rates are 2%, 10%, 20%, 40%, 50% for each year until peaking at 55%.Henry Beehttps://www.blogger.com/profile/12176365362835822750noreply@blogger.comtag:blogger.com,1999:blog-3524696061872254323.post-26662924270443802522007-04-09T07:53:00.000-07:002007-04-09T07:53:00.000-07:00The only flaw I see is that you assume that it wil...The only flaw I see is that you assume that it will have 100% market share. There are other drugs being developed and some people will still use today's standard of care for awhile.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3524696061872254323.post-58419047676197670892007-04-09T06:06:00.000-07:002007-04-09T06:06:00.000-07:00I appreciate your attempted use of DCF here, but I...I appreciate your attempted use of DCF here, but I can't find any disclosure of the discount rate you applied. It is extremely critical in valuing such highly risky/variable companies. Without disclosing that, it really isn't possible for the reader to determine how aggressive/conservative your target price is. Garbage in --- garbage out.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3524696061872254323.post-76981005300743337682007-04-08T11:07:00.000-07:002007-04-08T11:07:00.000-07:00This is a great article on Dendreon, which gets st...This is a great article on Dendreon, which gets straight to the point. I enjoyed reading an article that quickly discussed the stock in question, and offered a valuation. Great job.<BR/><BR/>Steve Rubis<BR/>http://researchingstocks.blogspot.comSteve Rubishttps://www.blogger.com/profile/01799475462531167149noreply@blogger.comtag:blogger.com,1999:blog-3524696061872254323.post-81817565586638802232007-04-08T11:01:00.000-07:002007-04-08T11:01:00.000-07:00I cannot agree with you more on both your points. ...I cannot agree with you more on both your points. In fact, Dr. Hall has stated that Provenge's price is $20,000 per injection and each patients typically receives three shots! $20,000 x 3 is easily higher than Adam's $30,000 estimate.<BR/><BR/>And yes, I suspect Dendreon will likely form partnership to sell Provenge in Europe some time in the near future. I'm unsure of the time frame that this will happen as I did not look into whether Provenge will need re-approval by an FDA-equivalent in Europe.Henry Beehttps://www.blogger.com/profile/12176365362835822750noreply@blogger.comtag:blogger.com,1999:blog-3524696061872254323.post-39450898035188656702007-04-08T06:38:00.000-07:002007-04-08T06:38:00.000-07:00You also ignored the ROW (sales outside of U.S.) v...You also ignored the ROW (sales outside of U.S.) value of Provenge, which I think easily pushes your estimate up another 20% or more.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3524696061872254323.post-17986735559653851342007-04-08T03:39:00.000-07:002007-04-08T03:39:00.000-07:00Hi Tweakie,Very nice work - but just one major cor...Hi Tweakie,<BR/><BR/>Very nice work - but just one major correction. Adam's biggest mistake, IMHO, was estimating a $30,000 cost per patient. If you look at other cancer bio-drugs, you'll see that they are priced at the $45-55,000 range. Hence, applying the $45,000 price tag instead of $30,000, under the same operating costs, would DOUBLE the discounted share price.<BR/><BR/>Just my 2 centsAnonymousnoreply@blogger.com