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Exelixis, Inc. Message Board

  • erniewerner erniewerner Jan 27, 2013 1:40 PM Flag

    M&A in Biotech

    Acquisitions are a fairly common event. Typically big pharma courts small biotech over a period of months until the parties reach an agreement and the deal is made virtually unchangable and is locked up with penalties, poison pills and a planned dilution to give the acquiring company a super majority to wrap up the merger in a short time before shareholder activists gain any traction or competing bids can emerge. In essence, the management and BoD of the biotech are bought and paid for to prevent a possible public vetting of the true value and an open and informed bidding process can emerge.

    The exception to this process are those mergers which have been mediated by activist investor Carl Icahn. We've seen it with Imclone, Genzyme, Medimmune, Amylin, and he certainly influenced the management changes at Biogen. Icahn used to have a position in EXEL, but he currently is not a shareholder.

    I fully expect an eventual buyout for EXEL. It is no secret that the company closed down its R&D activity and decided to run with Cabo. They decided to play the cards in their hand, and time will tell what that hand is worth. The best outcome we could wish for would be an uncharacteristic bidding war for EXEL, but the more likely scenario is a behind the scenes negotiated deal that is presented as a fait accompli to the shareholders. We can only hope that the management and Board holds out for a price that reasonably reflects the value of the underlying assets.

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    • Ernie, as much as I value your input and opinion, I've come to know you to be very conservative in almost every speculative future scenario. I, on the other hand, see there is plenty of room to be irrationally exuberant about EXEL's prospects. While history is an excellent guide for many situations - cabo has never happened before and appears to have unique therapeutic properties.

      It's highly likely that EXEL has turned down more than one offer for cabo already and would prefer a sale price to include all assets. As badly as management has handled things up to this point, they certainly understand cabo's potential and would not sell cheap the way MEDX management handled things. In the event of any scenario where the company is to be purchased (through agreement or hostile takeover), the possibility of a bidding war is excellent as soon as one BigPharm makes a move. Each BigPharm would value EXEL differently based on their needs and existing agreements. It's impossible to put a dollar value on cabo right now because all data suggests it will be useful in multiple indications. This makes cabo is worth fighting for.

      It made no sense to me to see ARIA's s/p increase 5 to 6-fold in a year's time on very little news and a single compound finishing PhaseIII in a single, somewhat limited indication - CML. I still do not understand it and this is why I've been selling some ARIA and buying EXEL. In a similar fashion, EXEL's s/p could easily double, triple or more in coming months purely on the basis of investors bidding up the s/p. This is BigPharm's dilemma. The longer they wait to buy, more clinical trial data comes in and s/p increases. A BigPharm bid on EXEL may induce a bidding war with not one, but multiple other Pharms.

      Joe

    • "I fully expect an eventual buyout for EXEL. It is no secret that the company closed down its R&D activity and decided to run with Cabo............but the more likely scenario is a behind the scenes negotiated deal that is presented as a fait accompli to the shareholders."

      what can we do other than accumulate as many as we can on the dip and then hold on until the moment comes? I guess we will never see multiple of current PPS, what a shame!

      Sentiment: Strong Buy

      • 1 Reply to metropath
      • "I guess we will never see multiple of current PPS, what a shame!" Don't throw in the towel yet, Seeing a double is not uncommon, I bought my last MEDX shares in the $6-7 range and just a matter of weeks later the $16 pps acquisition was announced. On the low end, MITI was trading at $8+ when Amgen bought it for $11, but it had traded much lower earlier that year. In both those mergers, long term shareholders were bitter, many joined class action law suits, and were even more embittered when the lawfirms were bought off and the mergers proceeded unchanged.

        There is room for EXEL to make a good run BEFORE any offers are considered and hopefully any premium will come on top of an appreciated pps. This is one time I think the Buysignal guy has it right. I've posted when I bought more, adding to my position here in the $4's.

    • That's ernie for you...always throwing caution to the wind.

      Sentiment: Strong Buy

 
EXEL
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