King says $82 NPV
A survey of 7,200 practicing U.S. oncologists by health-care market research firm MDRx Financial shows that Erbitux is now being used to treat more than 3% of all lung cancer cases in the US, up from less than 0.8% before the data release. MDRx estimates that in July, 5% of all Erbitux sales were for the treatment of lung cancer, up from an average of 0.7% previously.
M King of R&R did a nice sum-of-the-parts analysis and discounted back to 2008 to give a net present value for imclone. He took into account lung sales of erbitux where Werber did not (Yaron only considered 2009 sales for lung). King gives maximum sales of $800M worldwide in 2015 for nsclc, which I believe could be the minimum, so even Kings fair value is on the conservative side.
Kings NPV for imclone on a per share basis, using 94M fully diluted shares breaksdown as follows. 67 for erbitux, 4 for cash, 5 for manufacturing and 6 for pipeline for a total $82/sh NPV. That does not add in any value for a takeover premium. Y Werber values erbitux at $53 based on a multiple of 9XEV, using 2009 revenue of erbitux. This gives very little value to sales in lung cancer in subsequent years. If you add $9 per share to Werber value for the lung cancer indication (King uses $19 NPV) the two estimates of fair value would be the same.
The 1st paragraph shows that erbitux is already penetrating 3% of the lung indication and it is not even on all compendias yet. I estimate that if erbitux penetrates 10% of lung next year (2009) then worldwide sales in lung would be $800M. Note that King is using $800M as the maximum sales out till 2015. Conservative in light of the recent physician survey by MDRx.
Also I’m not sure that 94M shares fully diluted is correct, since 6.6M of those never get issued for IMCL under $90/sh (bondholders).
Kings fair value does not give any value for sales in Japan (>$400M), adjuvant (>$1B) or other indications currently in trials.
Full value would include these other parts. Full net present value is greater than $90 per share. The $60 offer from BMY is fair without the erbitux lung cancer indication or adjuvant, they are hoping to get those parts for free, and Werber appears to be assisting. IMHO.
