Biotech Values

[DewDiligence]

I give the BMRN-LJPC deal high marks for the detail of the disclosures made to investors. For instance:

…La Jolla could receive up to $289 million in cash through milestones and equity purchases by BioMarin. Specific payments include: $15 million upfront, up to approximately $92.5 million related to clinical milestones, $55 million for regulatory milestones, and up to approximately $126 million for achieving specified annual net sales milestones beginning at $250 million in sales.

…At each of the two interim efficacy analyses (the first expected in the first quarter of 2009 and the second expected in mid-2009) or when the ASPEN study comes to a successful completion, BioMarin may exercise its option to fully participate and share all losses and profits on a 50:50 basis… Depending on the outcomes (non-futile or achievement of p-value, p<0.001) of two predefined interim efficacy analyses in the Phase 3 ASPEN study as well as the complete Phase 3 clinical results, BioMarin will pay La Jolla up to an additional $47.5 to $92.5 million in clinical milestone and full participation payments prior to approval. BioMarin may apply up to $20.0 million of these pre-approval clinical milestones toward additional purchases of La Jolla preferred stock.

If the first interim efficacy analysis results in a non-futile determination by the Data Monitoring Board, BioMarin will pay a milestone of $15 million to maintain its license option. If the second interim efficacy analysis results in a non-futile determination by the Data Monitoring Board, BioMarin will pay a milestone of $22.5 million to continue its license option, $5 million of which may be used to purchase additional equity.

This should be the model for the level of disclosure in these kinds of deals, IMO.