Biotech Values

[DewDiligence]

ENTA’s pro forma enterprise value—assuming receipt of regulatory milestones from ABBV for approval of G/P in the US, EU, and Japan—is only $284M:

At 12/31/17, ENTA had $244.4M of cash and marketable securities and $6.4M of current assets net of current and long-term liabilities, which sum to $250.7M (https://www.sec.gov/Archives/edgar/data/1177648/000156459017001298/enta-10q_20161231.htm#CONSOLIDATED_BALANCE_SHEETS ).

ENTA’s guidance for its tax rate in FY2017 is 24% (#msg-128583816), so the after-tax value of the $80M in milestone payments from ABBV for G/P regulatory approval in the US, EU, and Japan is $80M(.76) = $60.8M. Adding this to the $250.7M figure calculated above gives $311.6M of pro forma cash and equivalents.

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At 12/31/16, ENTA had 19.0M basic shares outstanding; at 12/1/16 (the latest date for which data are available), ENTA had 2.2M options held by executives with an average exercise price of $33.19 (https://www.sec.gov/Archives/edgar/data/1177648/000119312517004534/d313986ddef14a.htm#toc313986_3 page 10-11). To be conservative, I count all of these options in my share count for valuation purposes, even though some of the options are non-vested and/or out-of-the-money. (Using this conservative method also enables me to ignore the much smaller number of options held by non-executive employees.)

Thus, there are 21.2M fully-diluted shares for valuation purposes.

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At the current share price of $28.11 (as I’m typing), the fully-diluted market cap is (21.2)$28.11 = $595.9M. Subtracting the $311.6M figure calculated above yields a pro forma enterprise value of only $284M at the current share price.