Biotech Values

[DewDiligence]

Re: Buyouts of biotech partners /fungibility

Buyouts of biotech partners happen less often than some investors probably think. Until today, the table in the post I’m replying to had not been updated in more than two years.

The reason (IMO) that some investors overestimate the likelihood of partner buyouts is the common belief that a company who owes royalties and milestone payments to a partner can “save” by acquiring the partner and thereby nullifying the royalties and milestone payments. But this notion is misguided insofar as the acquiring company is essentially paying the same royalties and milestone payments, but is simply paying them to itself. I.e. the company receiving the royalties and milestone payments is not more valuable to its licensor than it is to another prospective buyer (unless there are operating synergies, which is a separate issue).

For instance, several posters have claimed over the years that ENTA should be worth more to ABBV than to another buyer, but this simply isn’t true.