Jay- it’s safe to say this would never be bought out for triple digits, not anywhere close to that.
For any M&A, particularly a pre-revenue bio, there would be significant due diligence that would entail several factors. At this current moment in time, it would be a purely speculative purchase on the side of the buyer that would require them to assess the probability of approval for HIV Combo then Mono. Because Cytodyn has no approvals at the moment, the stock is worth no more than $5/share. With nearly 1 billion outstanding shares, that’s a market cap of $5B. For a company to pay $5B, they’d have to be reasonably confident they could get HIV Combo approved. Their bean counters would do a valuation on the anticipated revenue over “x” years and use a discounted cash flow calculation to get to the net present value. From there, it would be a negotiation as to what the multiple would be. For many established companies with a history of revenue, a multiple of 5-10x’s EBITDA or 1-3x’s revenue is a fair target. Cytodyn, or any pre-revenue bio for that matter, doesn’t have a history of sales to make valuation easier.
To get to Nader’s pie-in-the-sky predictions, Cytodyn would essentially need to GET approval (signed, sealed and delivered by FDA) for HIV Mono, tNMBC, GvHD and possibly one or two more approvals with enough opportunity for market penetration in each of those areas. Those would then be individually valued by using the same method of calculating the total universe of affected patients, expected market share of that universe, the revenue per patient multiplied by the length of time the patient is on Leronlimab. This would also require valuation of what insurance will pay.
One can then speculate if those same indications would be approved in other countries and doing a similar valuation for each. I’ve done plenty of M&A’s and there is no personal feelings or “maybe” taken into account. Feelings can’t be entered into a spreadsheet.
Some can argue the methodology and that’s fine. For those that do, I would have doubts on their M&A experience but I digress. Also, I’m not even considering Covid because the probability of CYDY being a player grows slimmer each day. With vaccines on the way and other therapeutics already being used, the pandemic may mostly pass us by the time any approval is granted. The full trial is only 80% filled which will take another couple months to fill, then 28 days after the last patient is enrolled then data lock then top-line data would be May at best.
So, going with Nader’s “triple digit” prediction, he is saying that Cytodyn would be worth a minimum $100B (with a B). With a stock trading at $2.60ish, no approvals on the horizon and a cash burn that can’t get them future cancer trials completed without massive dilution in order to raise cash, what would you say, as an astute investor, this company is worth? Between the current MC of $1.5B and $100B, what do you think a major investor would pay?
When one looks at this way, it’s obvious that Nader has absolutely no idea how a company is valued. For the record, he sold his own shares in the $3.50 range, leaving $96.50/share on the table. Doesn’t that seem odd?
At the current price, it’s possible to get 1-1.5x’s ROI, which is a damn good ROI
Hope this helps! All the best
Grip
AI
