Biotech Values

[DewDiligence]

RVMD acquires EQRX in all-stock deal priced at about EQRX’s cash value:

https://www.globenewswire.com/news-release/2023/08/01/2715636/0/en/Revolution-Medicines-Inc-to-Acquire-EQRx-Inc-in-All-Stock-Transaction-to-Gain-More-Than-1-Billion-in-Additional-Capital.html

Under the terms of the merger agreement, Revolution Medicines will acquire EQRx in an all-stock transaction. The stock exchange ratio formula in the merger agreement uses a blended average to account for developments in Revolution Medicines’ ongoing business and potential movement in its stock price. Approximately 80% of the stock exchange ratio is based on Revolution Medicines’ public market stock price measured in close proximity to the EQRx stockholder vote and the remaining 20% of the exchange ratio is a determined price per share of Revolution Medicines’ stock as of the signing of the merger agreement. Specifically, at closing, EQRx stockholders will receive the number of shares of Revolution Medicines common stock equal to the sum of 7,692,308 Revolution Medicines shares (determined as $200 million divided by $26.00 per share) plus a number of shares equal to $870 million divided by a price that is a 6% discount to the 5-day volume-weighted average Revolution Medicines share price measured in close proximity to the stockholder vote.

LOL! Cutting to the chase, I estimate that EQRX shareholders are receiving an approximate 20% premium to Friday’s closing price—but no premium whatsoever to EQRX’s cash value per share. EQRX has essentially been a shell company since discontinuing clinical development in Nov 2022 (#msg-170419645). For RVMD, this deal is tantamount to a financing transaction.