Replies to post #242374 on Biotech Values

[vinmantoo]

Yee calculates that the combined market capitalization of all the biotech stocks valued at under $5 billion is around $350 billion. The cash balance of the top 20 biopharma companies combined, meanwhile, is over $300 billion.

That is an absolutely stunning statistic. Since interest rates are rising I could see big pharma accelerating their M&A plans if they want to use debt to finance purchases rather that deplete their cash stockpiles. Well, at least for major buys.

[Biowatch]

Perhaps big pharma has a strong hunch that a lot of small biotechs are based on a single good idea that could easily prove worthless in the long run, or in the short term.

Or, even if it is a really good idea, it takes a huge amount of money to put it through Phase II and III stage clinical trials, so big pharma can afford to sit back and wait while small companies go through growing pains before they decide to cherry pick potential winners.

Keep in mind, being a CEO or CSO or CMO at a small company pays far more than any salary a junior professor makes, which makes starting your own company quite attractive if you can swing it.

In addition, if you get bought by big pharma, you may be shown the door, so, even with a golden parachute, it’s not the same as being in charge.

[DewDiligence]

XBI -54% from its 12-month_high_in Jun 2021.

[DewDiligence]

That Barron's article may already be stale, LOL.

[bladerunner1717]

“We’ve yet to see the seller change their mind-set on what the value of their company is,” Litchfield said. “I think the world lives in hope right? …And if you’re sitting in the biotech, you’re waiting to understand, is this permanent, or is it temporary? And that’s where I think they are.”

In his Friday note, Yee wrote that if and when large biopharma firms start buying small and mid-cap biotechs, it will signal that “sellers have adjusted their expectations and have accepted the new valuation.”

I'm not sure I buy this explanation. This makes it sound like sellers are being unrealistic. At these current valuations, I don't believe that sellers are being unrealisitc. I'm not sure it is in the Big Pharma mindset to just go in and buy up cheap biotechs, whether it makes good economic sense or not. I think there are other factors (a sort of "gentlemen's agreement" between Big Pharma and small-cap bios?) involved.

Bladerunner

[DewDiligence]

Big Pharma has patent expirations in_the_next_six_years_on_several_large-selling_drugs:

https://www.evaluate.com/vantage/articles/insights/other-data/patent-winter-coming

M&A will have to fill the gap, to a large degree.

[DewDiligence]

FTC schedules workshop on drug/biotech M&A:

https://www.ftc.gov/news-events/news/press-releases/2022/05/ftc-justice-department-hold-two-day-virtual-public-workshop-re-examining-antitrust-enforcement

Some of the current FTC commissioners are on record as having opposed to the BMY-CELG and ABBV-AGN deals, among others.

[DewDiligence]

PFE will_have_even_more_cash_for M&A after_selling_32%_stake_in Haleon:

https://finance.yahoo.com/news/pfizer-provides-ownership-interest-haleon-122700534.html

Pfizer Inc. today provided an update on its ownership interest in Haleon plc, the newly independent company which will hold the joint Consumer Healthcare business of GSK plc and Pfizer following the demerger of approximately 80% of GSK’s ownership interest in the business to GSK’s shareholders. Following the demerger and listing of Haleon on the London Stock Exchange (LSE), which is expected to occur in July 2022, Pfizer will continue to hold a 32% ownership interest in Haleon. However, in keeping with Pfizer’s transformation into a more focused, global leader in science-based innovative medicines and vaccines, the company intends to exit its 32% ownership interest in Haleon in a disciplined manner, with the objective of maximizing value for Pfizer shareholders.

PFE’s 32% equity stake in Haleon should be worth about $20B.