Replies to post #63641 on Biotech Values

[microcapfun]

Sale of drug companies is efficient?

>>From what I have seen, it is typically not the case that you get potential bidders competing. A seller is usually lucky to get one interested buyer and the final price is a function of which of the two parties is more interested in making the deal.<<

That was my impression too. The Teva acquistion of MLNM comes to mind. MLNM hadn't changed much as a company in the previous year or two. Yet suddenly Teva swoops down and makes an apparently outrageously generous offer MLNM couldn't refuse. Was there any other suitor in that price range? I don't think so. (There was a detailed description of the sale published as an SEC filing, and no other bidder was mentioned.) My impression is that MLNM couldn't have done nearly as well on the auction block if Teva hadn't been around.

I think Teva overpaid; if so, by definition the sale was inefficient.

micro

[DewDiligence]

Bob, in my experience, deals for drugs and drug companies are almost always competitive.

Exception: when the prospective buyer is the only plausible buyer because it is a majority (or large minority) shareholder of the seller, e.g. NVS-IDIX. In these cases, there is generally a pre-established contractual mechanism to assure a reasonable price. Regards, Dew