Anyone know what the traditional buyout percent premium is in the bio tech sector? For some reason, I thought I've seen premiums range between 25% to 100% and occasionally top 150%. I think Pharmasett (VRUS) was bought for 150% and IHTX was bought by BMY for something close to it. Point is - if AMRN hopes for a premium of 100 and Joe wants a minimum of 30, then this company will need NCE to get there.
There is no such thing as a traditional buyout percent premium in the bio tech sector as your 25-150% range shows. AMRN is as close to guaranteed a 2 billion a year drug as there is times 3 sales is 6 billion and that's 1 billion for Anchor and 1 billion for Marine. Anchor could lead to 5 billion in sales for all we know. IF REDUCE IT repeats JELIS results then this could be one of the biggest selling drugs of all time, no joke.
So stock price premium is a meaningless analysis accept for the ability of the buying BP to explain to shareholders the reason they paid such a premium. However, BP is not stupid, they can do the analysis and see that sales over the next 5-8 years could be astronomical and will at minimum easily cover a 6 billion dollar investment so if your CEO do you NOT buy something that makes sense because WS is not valuing the company properly?
Do the simple analysis:
Competitor risk: For the next 5 years minimum, maybe after 5 years base don current testing there MIGHT be a competitor, though less likely if REDUCE IT hits
Generic Risk: Until 2020 minimal to non existent and will be guaranteed non-existent to 2020 id NCE awarded though without it 95% guaranteed to 2020 anyways.
Market penetration risk: Unmet medical need with zero competition is the gold standard, Anchor is that, no competitors for min. 5 years, no generics for 8 min., established upper market worldwide of 1.5 billion(Lovaza) with a guarantee of that market expanding due to no LDL and Atrial Fib risk...
NEXT 5 YEARS
Competitor Risk: Very Low
Generic Risk: Very Low
Market Penetration Risk: Very LOw
BP knows Joe will not take less then 25 and maybe higher and they know it is worth it, they won;t let their company lose a huge asset because Wall Street mis-prices a stock.
Based on other companies launches when they reach 500 million in sales and showing strong growth market cap is 5 billion, so how fast they get to 500 million is how fast they get to the 20's on their own. So add Anchor for all of 2014 and more penetration to High trig market and.....? BP could get that to 2 billion in sales in 2014, AMRN, maybe not but 1 billion reasonable so based on other BIO's AMRN by end 2014 is a $40 stock, worth possibly $80 to a BP. So they get a VERY FAST RETURN on a BO.
So, personally, do not care what stock price is at BO time as Joe will not care and BP will not give up such an asset based on WS being ignorant. It WILL absolutely take a MINIMUM of 25 per share and BP will pay it because they are not that dumb.
You are correct. If Amarin launches product and establishes income the company would be valued appropriately for the standard buyout premium. But it would take years for Amarin to reach that point in order for the standard buyout premium to come into play and the stock market would need to cooperate and be in a state of normalcy as well.
Realizing why a buyout premium happens and what it is based on should be understood. Then you can know if and when it might come into play.
A company so early in its development does not have any way to fairly value its share price through the market in order to establish the value the company and its product as a lifetime asset. This means you can't use a buyout premium that might be used if Amarin was two to five years further down the road.
Today, there is no way to calculate the true value of this asset as a function of its share price. You calculate the value of the asset (AMARIN) and then divide that figure by the number of shares and that is how you arrive at a buyout per share price. So start calculating what the life value of this company is (Big Pharma) and use that figure to calculate what you would be willing to pay. This figure will vary from company to company so lets see what the highest bid is and then see if it is worth giving up this asset (AMARIN).
I can tell you it is certainly going to be more than 300% of current share price. But a buyer wouldn't have to pay over 300% if they wait for the share price to reach $25.00. If they wait for the share price to hit $25 then maybe a 100% premium would work but then again, this asset could be valued today at a lot more than you or I can figure based on our limited knowledge of all the variables.