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It's actually pretty simple. I have been

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KCSVEN   Thursday, 06/06/19 11:31:13 AM
Re: mrmainstreet post# 195465
Post # of 326781 
It's actually pretty simple. I have been in the loop on multiple private deals with private equity and not the same as this level but thought process of buyer and seller are very much the same andthey all went to the same business schools.

They analyze numbers, they analyze EVERYTHING.

So BP will sit there and go, what are expected peak sales, what are total sales expected to 2029? What does the company say they expect? Now let's poke holes in that, what are the risks to that #.

So if they say 5 billion peak sales is what there analyses says is fair. They reach that # in 2022 and it maintains that level for years, say they can come up with 50 billion in reasonable sales for Vascepa by time generics come in.

They will look at other potential uses, however that will be heavily discounted as having any potential because most drugs fail at additional indications and it takes years to find out and money to invest.

They will look at possible OTC sales after generics, but again discounted heavily the further you go out the higher the risk. It is all risk and reward. It's 90% risk analyses and 10% reward analyses.

What's the risk of generics earlier, risk of competing products etc...

I think $50 billion is reasonable assumption as a number they may look at. You have to discount future dollars and also take 20% off that for costs to manufacture so $40 billion can hit the bottom line over 10 years. If you pay 40B for that you lose due to time value of money so can't pay 40B.
So BP will say I can pay $20B(about $50 a share based on 400 million shares) if those numbers work out as I think.
So you don't offer $20 now because what if FDA says they want more studies, or denies or limits expand label, and then what if generics win suit and are in market in 2 years or you overstated the potential so you offer a lower #, say $12-13B. Amarin says we want $20B for example. Amarin knows de-leveraging risk is the key so will wait out FDA approval and BP will pay a little more then, will settle generic suits to 2029(hopefully), now fully de-risked as they can be. No debt, long run time, FDA approval!

BP willing to go up to say $15B, Amarin comes to $18B, do they bridge whatever gap they have? Do they want to add CVR's for potential other indications or higher Peak sales? BP probably wants to avoid that unless they can pay less, like $10 and lots of CVR's that can get to $20B or higher. Amarin refers $20B Plus CVR's to higher. Whether they bridge that gap is whether a deal gets done. BP knows Amarin will ramp slower than they would, may need to get money, have to spend for additional pipeline drugs, they know they have some leverage as GIA is a hard trail to take so they can negotiate hard as well as Amarin that has the bB drug has there own leverage.

Every BP on the planet would buy Amarin tomorrow at a certain price. My experience through deals is the weight put on risk is extremely heavy. As Amarin De-risks the price goes higher and a deal gets done. Is it possible to get done before FDA approval? Of course, but assumes BP is almost certain nothing will derail the expanded label, if you buy now and a surprise happens you get fired so they will wait unless there are competing offers and don't want to be left out if someone decides to go aggressive now.
De-Risk, De-Risk, De-Risk.




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