February 26, 2012

Cost to You; Cost to Them

Management, from the beginning, had a very good idea of how much it would take to bring PV-10 to market. And while how much the acquiring big pharma ultimately charges for the drug is outside of management's control, they also have a very good idea of how much it takes to manufacture PV-10 treatments.

Cost to you (as a patient). Make some general or rough assumptions. Use as the "cost" to bring either Provenge or PV-10 to market as Accumulated deficit. Obtain or assume a treatment cost. Assume the headline number of treatment cost is all revenue to the respective company, and that "break-even" simply is calculated as accumulated deficit divided by the cost of the treatment. 17,000 treatments would be necessary for Dendreon to recoup its Provenge development costs (very roughly speaking), while Provectus would need (for costs to date) 5,000 (I think the analysts assumed a $20,000 to $30,000 treatment cost; the higher end of the range drops the break-even number close to 3,000). While this is a very simplistic analysis, it gives you a sense of the nearly order of magnitude difference between the two companies.

Cost to them (to make). Did you notice the difference in product gross margin, too?

It's one thing to change a paradigm of a science (or an industry). It's another to do the same to the science's (or industry's) cost structure, too.

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