OOG,

I have been making a similar estimate on the income per patient that Mannkind will make. I have been assuming 30% of $2,000, or $600 per patient. Perhaps $500 is a better estimate. I tend to be much more conservative on revenue projections than on margin. I think it also depends on whether they partner or go it alone. With a partner, I would expect a 25-30% margin. If they go it alone, their margin should be higher, but I would also expect revenue to be much lower. Also, as they ramp up production, margins should increase because of economies of scale, so the earnings in the first couple of years might be lower than expected.

With only one years of earnings history, I can't imagine anyone valuing the company base on trailing earnings. Earnings at this stage of the company's growth are just to volatile to expect such a precise estimate or the earnings multiple to be valid. I expect revenue to grow according to some sort of "S"-curve. The value at the beginning of that curve gives little information on peak revenue or market penetration when the product is mature, although the shape of the curve may give a much better indication of future growth.

In my opinion, you should estimate forward earning and base your valuation on those.