very interesting read(long!!)
interesting to see what barrington projects revenues to be all the way out to the 2030's. looks like Novik is out once the deal is finished.
still buying every couple of days.
"In this analysis, Barrington used the Capital Asset Pricing Model to derive a discount rate range of 16% to 18% and Barrington estimated PROLOR’s terminal value by assuming that PROLOR’s free cash flows decreased at an annual rate ranging from 30% to 100% beginning in 2026 (given the patent expiration on PROLOR’s primary product). This discounted cash flow analysis resulted in an implied present value ranging from $7.19 to $8.34 per share of PROLOR common stock."
1) At an 18% discount, $1,000,000 of revenue in 2026 is worth less than $13,000 today (even less if you are looking at income) so those cash flows are not a significant contributor to the calculation anyway. I think 18% is probably high given the interest rate environment we are in and OPKs WACC but it is not ridiculous.
2) They only included hGH in the projections. Otherwise the even with the patent expiration there should still be revenues. The fact is there should be additional revenues (albeit highly discounted) for the other indications prior to 2026 or at least some value given to CTP. This is a serious oversight in the valuation in my opinion.
3) If there are plans to expand the Israeli operations, some value should be given there and from what I can see there is not.
What Frost is paying himself for Prolor is the minimum of the range, is based on a single indication, is based on assumptions given to Barrington by a management team who happens to be on both sides of the deal and finally is reflected off of a stock price that is in my opinion significantly depressed due to years of missed deadlines, delays and overall poor decision making by management.
The reality is, if OPK only wants to pay for hGH then they should be buying the rights to hGH and not receiving the rights to CTP as a whole. The question from me is why is someone who is supposedly as seasoned an investment guy as Shai is not able to get value for his shareholders for these things? Rhetorical...