Biotech Values

[DewDiligence]

IDIX Share Count for Valuation Purposes
and Chronology of NVS’ Equity Stake

The revised share count I use for valuation purposes is 71M.

Here's the arithmetic: According to SEC Form 424B5 filed on 8/5/09, as of 7/31/09 there were 59.08M basic shares outstanding. Adding the 7.25M shares from the financing announced on 8/5/09 gives 66.33M basic shares outstanding at the closing of the financing tomorrow.

According to the same SEC filing, as of 7/31/09 there were 6.48M options outstanding with an average exercise price of $7.93. I estimate that about one third (2.16M) of these options have an exercise price greater than $13/sh, and these options can reasonably be excluded from the share count for valuation purposes because they are unlikely to become in the money under most realistic scenarios. This leaves 4.32M “material” options; adding these to the 66.33M basic shares gives 70.65M, which I round to 71M for valuation purposes.

All told, NVS has invested $411M to purchase 31,309,498 shares of IDIX at an average cost of $13.12*. As of 8/10/09, these shares comprise 47% of the basic shares outstanding and 44% of the 71M shares for valuation purposes.

For the first time since IDIX went public in 2004, NVS is not a majority shareholder. This conceivably opens the door for a company other than NVS to pursue a takeover.

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*NVS’ shares of IDIX were acquired in the three main transactions shown below. (There were also a few small “true up” transactions that permitted NVS to offset new IDIX shares from the exercise of employee options.)

• 8-May-2003. NVS bought $255M worth of IDIX shares at $12.23 per share as part of the initial partnership agreement between the companies.

• 27-Jul-2004. NVS bought $76M worth of IDIX shares at $11.63 per share, pursuant to contractual rights in the 2003 agreement between the companies. (This purchase consisted of 5.4M shares at $14.00 and 1.1M shares at no cost.)

• 31-Oct-2005. NVS bought $80M worth of IDIX shares at $20.61 per share as part of a public offering.