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Avi Cohen  

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  • Why Newly Listed T2 Biosystems Could See Massive Upside In The Next 5 Years [View article]
    Here is another way to arrive at a valuation:

    15M tests are currently conducted annually (in the US alone) to screen 8.75M patients that present with sepsis symptoms.
    Of those 8.75M patients, 6.75M are high risk critical care and immunocompromised.
    Of those 6.75M, 40% or 2.7M patients are preemptively treated with anti-fungal medication until a blood culture either confirms the infection or returns a negative result.
    Of the 2.7M patients preemptively treated, ONLY 2-5% or ~135,000 patients are actually positive for candida.
    Therefore 2.7M patients, 95%+ of whom are currently unnecessarily treated, are the initial TAM for T2.

    2.7M tests x $195 a test = $526m in revenues once this initial product is rolled out. Lets assume they capture 50% of that market in 5 years (it should actually be more especially if you double all the above to account for Europe and developed Asia) we are at $263M in revenues.

    Typical EV/Sales Multiples for such names (especially ones with follow-on products and ultra high growth rates) are between 5-10x ... so in 5 years this company will be worth between $68 and $136 per share.

    Discount that back for 5 years at 10% a year and you still get $40-$80.

    Yes there are risks but the reward here seems compelling (and yes I own the name.)
    Oct 1, 2014. 01:27 PM | 7 Likes Like |Link to Comment
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