An estimated 16,000 to 29,000 patients live with Dravet syndrome in the U.S. and Europe. In order to value ZX008 in Dravet syndrome, I have assumed the total number of patients living with Dravet syndrome in the U.S. and Europe at 25,000 in 2019, the year ZX008 could be potentially launched. I have assumed 80% penetration rate. At peak, I have assumed that ZX008 will be able to capture 50% of the market. The treatment cost is assumed at $50,000, which is reasonable considering that ZX008 is treating a rare disease. I have assumed a drop in market share to 10% in 2026 when ZX008 faces generic competition. I have calculated the terminal value in 2027.

The growth rate is assumed at 3%. The terminal value growth rate is assumed at 2%. The discount rate is assumed at 8%. The probability of approval is assumed at 70%.

Based on these set of assumptions, I get a fair value of $26.27 for ZGNX, which implies an upside of almost 165% from current levels. ZGNX ended the June quarter with $127.80 million, which based on the existing burn rate is sufficient to fund operations at least until the end of 2017. Therefore, I do not see near-term dilution risk for ZGNX.