Replies to post #63777 on Biotech Values

[ThomasS]

Buyout premiums: Perhaps using the 52-wk high as a surrogate marker may not be appropriate when calculating the premium. It seems intuitively correct, but is not a relevant gauge, imo.

[corpstrat]

How about acquisition prices relative to intrinsic value? Did any of these guys get acquired at a steal relative to probable value of their pipelines? For those of us who think we've spotted an under-valued (risk-adjusted) stock or two, that's what matters.

I know it's hard work to even take a stab at that unless one's followed the company's pipeline. Take Kosan: $200MM for two molecules in mid-stage trials - one with so-so results to date for combo use with Herceptin in B Ca and Velcade in myeloma, and the other in NSCLC. Does not look an obviously unreasonable price. (Fairly low probability of success and not huge revenues upon success because of modest combo efficacy claims?) Any burned and better-informed Kosan holders feel like arguing the other side?

That many of the stocks on the list were way off their 52 wk highs probably means setbacks to the pipeline in the past year - looks that way for Kosan. Setbacks drop the intrinsic value - it's not just market fickleness, right?

[DewDiligence]

Re: Biotech buyouts at a large premium

>the premium relative to its 52w high certainly shows that buy & hold is not the path to riches.<

Thanks, Moby, for your table. As stated in my reply to corpstrat, it’s hard to generalize about these deals. Many acquisitions are indeed the result of failure (e.g. COLY, ENCY), while others are the result of impressive achievement and unique technology (e.g. SIRT, Sirna, GlycoFi). Still others appear to be driven by geography and a desire to bulk up (e.g. MLNM—I agree with micocapfun that Takeda overpaid).

The bottom line is that each case must be evaluated on its own merits. My motivation for posting the buyout table was to dispel the canard that acquirers will not pay a large premium to the market price. Regards, Dew