Biotech Values

[DewDiligence]

Re: ENTA’s Enterprise Value

At yesterday’s closing price of $23.18, ENTA’s market cap, based on 19.7 fully-diluted shares (#msg-92234861), was $457M. The cash balance at 6/30/13 was $115M; assuming $10M of cash usage since 6/30/13 (burn was $6.9M during 2Q13) leaves $105M today. Subtracting $105M from $457M gives an EV at yesterday’s close of $352M. Feuerstein’s $260M figure was understated by not accounting for the 1.8M in-the-money stock options and the cash burn since 6/30/13.

However, the difference between Feuerstein’s figure and the correct figure is almost inconsequential in the overall scheme of things, IMO. The main point of Feuerstein’s article is that ENTA will almost certainly receive pre-commercial milestone payments from ABBV that comprise a substantial portion of ENTA’s current EV, which is an unusual situation for a small biotech company. Moreover, Feuerstein did not even mention ENTA’s partnership with NVS, which has the potential to generate hundreds of millions of dollars in additional milestone payments (#msg-89752221, #msg-89280314).