Biotech Values

[DewDiligence]

IDIX Diluted Share Count for Valuation Purposes
(and Chronology of NVS’ Equity Stake in IDIX)

[Updated for recent financing transaction and info re options in Form 424B5 filing.]


The updated share count I use for valuation purposes is 77.4M.

Here's the arithmetic: According to SEC Form 424B5 filed on 4/29/10, there were 66.4M basic shares outstanding before the latest financing transaction. Adding the 6.5M shares from the latest financing gives 72.9M basic shares outstanding at the closing of the financing today.

According to the same SEC filing, there are 6.8M options outstanding with an average exercise price of $6.88. I estimate that 2.3M (roughly 1/3) 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 4.5M material options; adding these to the 72.9M basic shares gives the 77.4M figure cited above.

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All told, NVS has invested $411M to purchase 31.3M shares of IDIX at an average cost of $13.12. These shares comprise 43% of the 72.9M basic shares outstanding and 40% of the 77.4M shares for valuation purposes.

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 the issuance of 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.