Biotech Values

[zipjet]

Mr. Market over reacts. Upon T-En approval, I think 6-8 is very possible if not probable. The value of MNTA is then totally dependent on M-Cop and 118. The market will discount them big-time. MNTA would no longer be cash flow positive.

8 is certainly possible. An overreaction but possible. 6 seems extreme to me. At 6-8 the MC is $300-400M which is less than the value of the royalty stream. So at those prices you buy the whole company for less than the value of the royalty stream. I agree that the company is not cash flow positive on the royalty alone. But the burn at that point is low - low enough that milestones might carry the burn. Should the approval hold off a year, MNTA will have accumulated enough cash to pay for year at the low burn rate.

My first reaction was that they are not similar since VPHM already has another drug that is ramping up sales, but on reflection I agree that the overhang and the existance of other potential revenue do make them similar.

The differences are significant. The generic overhang is common. But there other interesting similarities. VPHM by buying Cinryze moved free cash flow from ~$20M/Q to ~$40M/Q, carries a MC of $1.2B. By mid 2011 MNTA could FCF $65-75M/Q. At that point, what MC should MNTA carry? On FCF you could argue for $1.95B to $2.25B, $39-45 ps. They both still have an overhang. VPHM does still have a fine long term product. MNTA has promising candidates and potentially valuable technology and patents.

I think that it is unlikely that T-en gets approved in the short/mid term.

I agree.

Thanks for your comment Rocky - always valued by me.

ij