"With an NCE decision for Amarin's (NASDAQ: AMRN) Vascepa just days away, a note from Canaccord Genuity on Friday pondering a takeover garnered a lot of attention. Canaccord Genuity analyst Ritu Baral took a deep-dive into a potential deal, which could be valued at up to $78 per share.
First the firm discusses the strict and sensitive Irish takeover law, where Amarin is based. Under Irish takeover laws an announcement is required:
(c) when, following an approach by an offeror to the offeree, the offeree is the subject of rumour and speculation or there is an anomalous movement in its share price;
(d) when, before an approach has been made by an offeror to the offeree, the offeree is the subject of rumour and speculation or there is an anomalous movement in its share price, and there are reasonable grounds for concluding that the cause of the rumour, speculation or price movement is the offeror’s own actions or intentions;
Because of this, "potential buyers are likely to be very secretive and circumspect, as any confirmation of talks would likely build in a significant premium to the stock, working against their interest," Baral said.
While NCE is incremental to value, the analyst said large pharma has grown more conservative, paying premiums for certainty, whether on data, IP, or clarification of
market timeline. "We do not think BD teams have any incentive to submit premature bids, tipping their hand to competition," he said.
On NCE status for Vascepa, the firm sees an over 50 percent chance that is is granted. "FDA's delayed decision only suggests the determination is complex, which we knew," Baral said. "We think if FDA was inclined to reject NCE, it would have done so by now. The agency may still not grant NCE, but it is clearly very carefully evaluating the decision."
Discussing what Vascepa is worth, the analyst discusses three scenarios:
Scenario 1: Acquisition
With values ranging from $17 to $78 per share based on SG&A and duration assumptions, Vascepa's EV makes AMRN a Buy even in a worst-case scenario, the analyst said. If Vascepa has full patent protection through 2030, using SG&A at 3% of sales, the firm comes up with a valuation of $76.26. Even under a worst case, assuming no patent protection and just three-year exclusivity, "we think an acquirer could market Vascepa with incremental SG&A spend, and arrive at an enterprise value of ~$3.9B, or $21 per AMRN's FD shares outstanding in this worst case."
Scenario 2: Out-license
"Our current model assumes AMRN out-licenses worldwide rights, and patent protection through 2030, and that AMRN collects 28% royalties. In this case, Vascepa's enterprise value is $4.9B, or $26 per AMRN's fully FD shares outstanding.
Values range from $4 to $28 per share on royalty % and duration assumptions."
Scenario 3: Self-marketing
In this case we assume significant SG&A spend, and heavily discount revenues to account for launch risk, and arrive at an enterprise value of $5.7B, or $30 per AMRN's FD shares outstanding. Values range from $8 to $49 per share on discount rate and duration assumptions."
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Sentiment: Strong Buy
78? Lol joke of the decade atleast when pps is in 12's and these anals are never accurate yet i like the idea of 78 but even if this was remotely true big pharma would scoop this for cheper than 78.
Based on the SGA % value chart NCE is worth double NME, of course patent protection(if solid) is worth the most, NCE will be very key in determining BO value if this is the Wall Street thinking. I could see why waiting makes sense, the range maybe so big that any negotiating before NCE could not come to any rational number. If only NME then studying the solidity of the patents will be crucial for any buyer. With NCE becomes less important but still important.
Some were right in patents are the most important but they were wrong in NCE not being important. Since patent protection would be fought in the courts it is not as KNOWN as NCE.
Interesting how the analyst broke it down. Please let's get NCE this month and move on here.
Quick note re DBSanFran posts
Compare costs --- I am paying about about $5.20 right now for 4 gms of PLUSEPA I take each day . I buy it thru Amazon and notice the price appears to be slowly drifting higher .
With those 4 gms I get 8 times the impurities that the average person taking the suggested dose gets on a daily basis . Think about that ---altho the risk may be small it means in 1 yr I will have eaten the same amount of impurities that some one taking the suggested dose will eat in 8 yrs ?
The joke may be --with Tier 2 insurance co pays ---Rx quality Vascepa at 4 gm dose may be cheaper then DS supplements like PLUSEPA at 4 gm dose ----- even if its only close ---why bother with DS quality at that dose level.
It seems Ritu is assuming Self-marketing in her price target of 26 or 27$/share as the current scenario.
I agree -Buyouts will delay the launch. At some point Joe Z. has to make a decision on LAUNCH. I think by midlle of Nov.-Decision will be announced--probably by end of Oct.2012.
Question. Newbie here. Does anybody really care when a launch occurs? I mean, if there is a buyout the PPS would automatically go to that price and most would be happy with profit taking. The only ones who would care about whether a launch was delayed are the ones who are holding very long. Yes?