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Antigenics Vaccine Booster Baked Into Valuation: BioBuzz

LEXINGTON, Mass. ( TheStreet) -- I spent a very long day at the Rodman & Renshaw investor conference Wednesday (Amtrak's Acela between Boston and New York City is a nice way to travel, but roundtrip in a single day? Arduous).

I'll have updates and news from my Rodman conference trip over the next several days, but let's get started with Antigenics (AGEN). The company's royalty rate for its experimental vaccine adjuvant QS21 ranges from 1.5% to 6% depending on the vaccine, but is generally in the low single digits, said CFO Shalini Sharp in a response to my question after her presentation.

I'm glad she answered the question because the company hasn't been willing in the past to shed much light on the QS21 royalty rate agreements it has with various partners who are developing vaccines containing the Antigenics' adjuvant as a booster.

The not-so-good news for Antigenics is that a low single-digit royalty rate doesn't bring in that much money, especially compared to the company's current valuation.

For example, let's assume that GlaxoSmithKline's (GSK) malaria vaccine (which contains QS21) is launched in 2011 and peaks at $1 billion in sales by the end of 2014. I'm going to also assume Antigenics' royalty rate at 1.5% (likely since a malaria vaccine is a low-margin product sold primarily in the undeveloped world.)

That works out to $15 million in royalty revenue for Antigenics. But of course, that's five years in the future, so the net present value of that revenue today is just over $7 million. At a multiple of six times, that's worth just under $43 million in current enterprise value, or 48 cents a share, for Antigenics.

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