Biotech Values

[DewDiligence]

MNTA Share Count for Valuation Purposes

By my calculation*, MNTA has 53.3M diluted shares for valuation purposes. The count includes options held by directors and executive officers, whether or not vested, but not options held by rank-and-file employees. All but a negligible portion of MNTA’s officer/director options have an exercise price <$20 (http://sec.gov/Archives/edgar/data/1235010/000104746911004077/a2203592zdef14a.htm#toc_dt73701_1 ), so it’s reasonable to include all of them in the diluted share count for valuation purposes.

I ignore the anti-dilutive cash MNTA will receive from the exercise of officer/director options because this cash will be offset by dilution from option exercises by rank-and-file employees; although this offsetting effect will not be exact, it’s close enough, IMO, for a first-order analysis.‡

As of 3/31/11, MNTA had 50.8M basic shares outstanding (http://sec.gov/Archives/edgar/data/1235010/000110465911026306/a11-9210_110q.htm#CondensedConsolidatedBalanceSheet_074239 ). As of today, insiders hold 2.5M options (#msg-65105650). Thus, my diluted share count for valuation purposes is 50.8M+2.5M=53.3M.

Note: The above figure differs from the diluted share count used to calculate GAAP EPS.

--
*The number of diluted shares for valuation purposes is necessarily somewhat subjective because the arithmetic includes circular logic. I.e. the number of in-the-money options depends on the share price, and the share price depends in part on the potential dilution from options.

‡This assumption would not work well at companies that have a large number of options held by rank-and-file employees.