This is in general good for the company. Is there a way to quantify the impact now or we will have to wait and watch?

It’s more likely that the moderators have restricted access. This used to be the link.

https://forum.valuepickr.com/t/smallcap-hunter-trying-to-find-the-dark-horses-with-triggers/47673/127

Hi fellow shareholders,
Have you received the 1:1 bonus shares?
Was there any action required from the shareholder side to get the shares?

Seems like the result of Q2 will be very good

Kalki is continuing it good run
Kill will slowly pick up pace, It is a movie which will become a sleeper hit
Sarfira promos look good
Auron mein kahan dum that again looks interesting
Hindustani 2 seems bad but perhaps marketing will help

Overall seems like Q2 has good content lined up

Some more lenses for consideration when trying to put a value to WCK 5222/ Zaynich.

A couple of important points need to be made before I lay out my estimates.

1. My core premise is to look at this like a VC firm would. An investment in one “Facebook” equivalent is what makes up a bulk of VC returns. One success pays for many many others that go nowhere, and then some more. The “Facebook” for Wockhardt is WCK 5222. I expect this drug to be by far the dominant driver of value for the firm.
2. There are still many hoops to jump over before anything can materialize. While the news is encouraging, very many things can derail the whole thesis. This remains a risky bet. On another thread, I have already admitted this being an investment “driven by the heart” for me

Approach 1: Learning from Orchid
Orchid’s drug Enmetazobactum is estimated to generate global sales of US$ 200-300 mn. Orchid is estimated to get royalty of 6-8% from Allecra for US & Europe (from where, let’s face it, most of the revenue will come from). ==> Orchid Pharma Ltd – #25 by ranvir

My sense is that Zaynich has much more potential than Orchid’s drug, given what we are seeing of the drug – one may simply scroll through the thread here to get a feel. So, US$ 500 mn I believe is conservative. Similarly, Wockhardt is likely to get a better royalty deal than Orchid, which means the 6-8% is an absolute floor.

Now, Orchid’s drug has FDA approval, and it has struck its licensing deals. Where has this taken its value? Total enterprise value (market cap + debt) of Orchid = US$ 725-730 mn.

Wockhardt, with around US$ 250 mn of debt, has an enterprise value of US$ 1.8-1.9 bn today (as on 08 Jul’24) – share price of around 880.

Now, I tried to flex the key variables – the global sales for Zaynich (my conservative estimate being US$ 500 mn, and flex being from 250-1,000 mn); and the royalty/ revenue share % that Wockhard will get from a licensing deal (absolute floor being 6%, and flex from 6% to 25%). Here is what the results throw up for the resulting share price.

Approach 2: DCF of royalties from Zaynich
Again, assuming a conservative number of global sales for Zaynich as US$ 500 mn. At a 7% royalty, Wockhardt would earn US$ 35 mn/ year. Assumed some ramp-up (initial year earnings at 70% discount to this US$ 35 mn, second year at 40% discount to the stable state US$ 35 mn/year), and then growth (the US$ 35 mn growing at 30% p.a. from year 4, tapering down to 10% over the next six years). Finally, applied a discount rate to get the NPV of these royalties, assuming they start coming in two years down the line.

Here’s what this looks like for a 7% royalty share and discount rate for NPV calculation of 17% (asking 20% in INR terms, and assuming USD will appreciate around 3% p.a. against INR):

So NPV of US$ 199 mn. Wockhardt’s enterprise value today (as we saw in approach 1) is ~US$ 1.9 bn.

I next flexed two key drivers again, this time left the US$ 500 mn as is. I flexed the royalty %, and the discount rate for NPV (which you can say is a proxy for the returns expectation). Here’s what that threw up for the NPV for Zanynich royalties (to be seen against the current enterprise value of Wockhardt of US$ 1.9 bn):

So, the NPV of Zaynich even with high royalties does not seem as big. Of course, if the US$ 500 bn turns out to be, say US$ 1 bn, then these numbers go 2x.

I also did one last thing. I was curious to see, with the US$ 500 mn as global sales assumption for Zaynich, what royalty % and discount rate would make the Zaynich royalties match the current valuation of Wockhardt (the whole company; recall my initial premise that I expect Zaynich to be by faaaar the biggest driver of value for Wockhardt). One answer was 36% royalty with 10% discount rate. So US$ 500 global sales, with Wockhardt getting 36% revenue share as royalty and with expectation of 10% returns would mean that Zaynich royalties would represent the whole of Wockhardt’s current value.

It’s been a long post, and a little technical (in terms of finance calculations). Apologies if I ended up confusing you, rather than providing any insights.

Disclosure: Invested, from lower levels. Investment driven by the heart.