Biotech Values

[DewDiligence]

WCRX-PG addendum: The actual deal price is $3.1B, which is less than 1.6x the annual sales of PG’s drug unit. Can anyone remember a cheaper relative valuation for a portfolio of marketed products?

Other than PG’s strong desire to cash out, I see two impetuses for such a low valuation:

1. The US CoM patent for Actonel expires in only four years (Jun 2014), and the formulation patent that runs until Jun 2018 won’t be sufficient to thwart generic competition.

2. Many of PG’s 2,300 drug-unit employees may not want to work for WCRX, and rehiring personnel is a costly endeavor. (Today’s PR jointly issued by WCRX and PG cautiously states that, “…the majority of the 2,300 employees working on P&G's pharmaceuticals business are expected to transfer to Warner Chilcott.” This could mean as few as 51% will make the transition.)

The companies’ joint PR is at: http://finance.yahoo.com/news/Warner-Chilcott-Acquires-PGs-prnews-501330686.html?x=0 .