Many will wonder what would be the PPS based on the Royalty Agreement.
I posted many times what would be the projected revenues for just AFFYMAX on the royalty structure.
The Royalty structure is 13-23% based on the volume. I would consider a flat 15% royalty structure for our calculations.
Having bitten once, Takeda will be extremely careful in the manufacturing, administrative and marketing processes and they will incur substantial amount of money into this, just to ensure they don't have a repeat of the same, even though the administrator (Frensius) is at Fault going by the information we have been gathering.
Despite all that AFFY will spend ZERO, let me repeat ZERO amount for any of it. Moreover the ROYALTY is NOT ON PROFIT rather ON SALES VALUE.
Worldwide max sales of O's is expected to be 4 BLN, even if they achieve 50% in 2-3 years, it is worth almost 300 MLN in AFFY income, which is almost $8 per share.
On top of it you have 180 MLN $ milestone payment coming in too.
With Takeda's backing and perpetual royalty payout (as long as the Product is sold) AFFY shareholders will benefit immensely on this arrangement.
Since the process is Peptide based and is to manufacture, store and administer. After 14-15 years of expiration of Patents too, due to its low cost manufacturing structure and brand name, OMONTYs will survive like ASPIRIN for ever.
Worst case scenario if O's is not coming back you will loose the part of your current PPS, however one needs to wait till the END. The rewards are huge here.
Sentiment: Strong Buy
Jagan...sorry another "minor" correction on this post where you said:
"Worldwide max sales of O's is expected to be 4 BLN, even if they achieve 50% in 2-3 years, it is worth almost 300 MLN in AFFY income, which is almost $8 per share." THAT LAST PART SHOULD READ $8 PER SHARE PER YEAR !!! This is part of why I truly believe that the $12 offer was from Takeda as an ULTRA-LOW BALL starting point (aka "THE FLOOR") in the negotiations and why I personally would prefer the Royalty Trust option (private preferred, but publicly traded OK). The big institutions still in are AT THE TABLE AND CERTAINLY KNOW HOW TO RUN THE NUMBERS AND HAVE PRETTY GOOD LAWYERS AND EXPERIENCED IB's THERE.
OMONTYS returned and the numbers will be comparatively enormous no matter what the ultimate deal $ and construct turns out to be. AND I'VE NEVER SEEN A 3/25000 fatality record kill ANY FDA APPROVED Rx...NEVER !!! And it certainly appears this one is right at Fresenius' feet and the investigation (after the battles between Takeda and Fresenius end one way or another) will provide TOTAL Omontys EXONERATION !!!
But if ANY of you bashers can provide such a case history I will surely give it a deep dive as will every other long on this board...But you better make sure it is both real and the stats correlate !!! ASSERTIONS WILL NOT HOLD...show hard, documented evidence publicly available to all here!!!
Maxdad, Your comment "The big institutions still in are AT THE TABLE - - - - ." raises a question. When a positive deal is struck for AFFY these aforementioned institutions will be aware of the terms. Will they not be recommending to "special" clients to buy the stock? Will this then cause the stock to rise, not in pennies, but something more substantial? Following, isn't the next scenario, the public announcement is made, followed by uninformed shorts driving the already accelerating price, but now in dollars per day until the crescendo? TIA for your insights/comments.
Sentiment: Strong Buy
Max: Though I too believe in a Buyout theory, no one will be very clear about the Buyout PPS. Quite a few variables here, however I would like to wait to hear the announcement if any rather than jumping to $6 or $12 or $25. I provided my valuation based on the potential expected income and the benefit to AFFY shareholders. The only great thing about it is its PERPETUAL NATURE of this Royalty structure. Since it is low cost easy to manufacture, store and administer, Takeda will be able to compete even after the Patent expiry and its reputation.
If there is a buyout Takeda will have to Fork out a huge sum, I won't be surprised it will be more than the 52 Week high valuation! Very excited about the prospects here.
Sentiment: Strong Buy
Jag, the only question I have to that is that if it is announced that O is coming back and Affy will be collecting royalties and let's say they announce pre market, do you forsee a mad scramble to gobble up shares. Could we see a frenzy buying and as a result a huge spike in price for a few days before it settles down to a realistic figure.
WHAT HAPPENS TO AFFY SHARE PRICE AT ANNOUNCEMENT POINT WILL BE A FUNCTION OF THREE THINGS:
1. The $ amount of whatever deal is proposed
2. The CONSTRUCTION of the deal (buyout, Public RT, Private RT or some other construct)
3. The potential over reach on 1&2 as massive short squeeze occurs...All shorts will be at the exit door at exactly the same time and fighting to exit as fast as possible...We've all seen these go substantially above deal prices temporarily based on the "physics" alone. And this too will be a function of how definitively deal is laid out and dependent on the specific construct employed.
No matter what, when Omontys return is made public the reaction will be so hard and SO FAST that it will actually be tough to get a reliable quote and perhaps the only time it might make sense to put in a market order if you're wanting to take your money and run!!! But do give the squeeze some time to fully energize (won't take that long...and will be THE STORY STOCK ON CNBC et al...)
It will touch its previous highs because funds will be betting on the discounted royalty structure.
On top of it Takeda needs to make VERY VERY POSITIVE ANNOUCEMENT, since once bitten twice shy story, the Patient/ Medical Fraternity NEEDS TO GET IT LOUD AND CLEAR!
It is not cheering the AFFY/TAKEDA shareholders but the entire Patient population and Service providers Worldwide.
That is why I see the sustained upswing on the PPS.
Takeda will NOT RELEASE THIS TO ANYONE it will be a CONFIDENTIAL INFO and made public to anyone. That is why you will not see any movement in PPS, shorts will be shell shocked when it hits the newsstand!
Having used AFFY MORONS Underhand dealings, this will be a bombshell news for Shorts!
Sentiment: Strong Buy