While I believe their are over $200 million in milestone payments left, I believe the bulk of that number is based on annual sales post approval. It's something XON could earn, but everything above the $5 million milestone for initiating the Phase 2B Trial is doubtful, but possible in 3 years.
The key is, just how well is the drug doing. If results are great, it's not impossible that approval could come out of a Phase 2B Trial, and I've got to believe that perhaps $25 million would be paid if we gained approval. I really can't see that occurring in much less than the 3 years, so royalty money and post approval milestones are very doubtful. That said, I'm guessing at these figures, the only one I know that's been quoted is the $5 million for initiating the Phase 2B.
Based on the O/S $5 million should equate to a little over $1 per GNVC share for investors, and it's my belief they'd only be vested if they hold the stock until it's converted to XON, I hope to get confirmation that's the case. As I see it, the only other possibility would be paying shareholders prior to the time the announcement was made, and I doubt very much that it's the case.
To some degree I believe this buyout is creating weakness in XON's share price as investors can purchase GNVC at barely over .297 of XON and know they may see $1 or more a share if the hearing drug moves forward in the next 3 years.
Of course it's possible they won't reach Phase 2B in that time, I'd say the odds are about even that they will. The point is, if I can buy 337 shares of GNVC for slightly more than 100 shares of 100 shares of XON, and if I have a chance to gain roughly $350 or more for buying those shares in GNVC, instead of the shares in XON, why would I buy XON. In short, until this agreement is consummated I suspect that XON's shareprice may routinely see new 52 week lows, with GNVC dropping proportionately. If the premium for GNVC approached 50 cents, perhaps investors won't take the gamble, but last I checked, GNVC was 21 cents higher, and it's been substantially less than that when I've checked previously.
As I read the agreement, I believe it applies to all earnings over the next 36 months, not just Novartis. Should BioThera gain a partner that would bring funds into GNVC, we'd be paid, likewise if Merial started selling the FMD vaccine that utilizes our technology. In today's world $5 million isn't that much money, so it's not impossible that we'll see that a few times over as things develop. In that for every $5 million increment we see $1+ a share, it's impossible to say precisely what we might see in 3 years, but it's certainly possible that we'll see nothing. If I were looking at XON, I'd strongly consider GNVC instead, especially if the premium was 10 cents or less, which it has been many of the times I looked.
Gary
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