Let me provide my version of "back of envelope" calculation (see article in SA). The assamptions: 1.The buyout price is usually about 4 times sales. 2.The total sales of Nevaxtar now around 480 mil, growing, so lets assume .5 B. 3. Carfi EXPECTED sales are between 5.b to 1.5b so lets assume another .5B So we already have .5+.5=1B X 4= 4B 4. Rego: ONXX gets 20% royalties, so I assume it will be around 100m. Using P/E 10 it contributes another 1B to buyout price. 5. Cash on hands - around .6B. So, the total buyout price is:4B+1B+.6B= 5.6B, i.e around $85 per share. Of course if you make any other assumpitons the buyout price will be higher or lower... Who will buy ONXX? (If at all). Besides Bayer and some Japanese company, in my view,- no one. Now, more interesting question: what will happen if there is no buyout? It could be argued that in long run, when sales of new drugs start increasing ONXX will go to above mentioned $85 or even higher. I, however, believe that if buyout does not materialize in 1-2 months after FDA approval, ONXX will do exactly the same thing it did before: it will buy some promising compound/s (after all carfi is not exactly their in-house development...). My understanding that they will look for something that could be brought to market in 2-3 years. Last time when they did it the stock price took a dive, but as you can see this strategy worked pretty good in long run. So, if there is no buyout until September, I'd assume that in short term stock will suffer and'll go back to mid-50, as a result of traders disappointment, but eventually, when sales start mounting, will recover to higher level. And the last remark: it will be interesting to see what effect on stock price will have approval (that seems almost certain at this point). Comments, please!
Thanks for your analysis below. Have you ever crossed a micro cap called XTL Bio. which is also engaged in relapse MM patients and is entering phase 2 in a bit, though only trading at 70 Mln. marketcap?
interesting, kot. you achieved with your guesswork just about what i guessed at last week. i assumed on the back of my own envelope that ONXX will shoot to about $90 per share by 1 October. you did an even finer job of breaking it down. i actually bought in last week at 66 and am holding my breath until 27 July when the NDA gives its review of Kyprolis. Phase III I say will be a huge success and the stock will take off. those who are on the train will get to that destination in the sky. the rest out there will continue to be onlookers. i look forward to a happy summer. my take is that Kyprolis will become the next wonder drug to treat mylonoma and save patients all over the world. GLTA
Goodguy, with all my respect for ONXX management and their fine execution, I don't believe it will get to $90 by Oct 1 (or by the end of the year) on its own. Only by buyout. It is long way from approval to sales, and not just any sales, but in 100's mil. So, as I've said, eventually, even without buyout stock will get to $90, or higher (because possibility of buyout always will be looming), but I expect that at some point market will turn bearish and/or exitement about ONXX will fade for some time...but I'll be holding- even if we get to $100 in 2 years it is still 50% in 2 years- in my view very respectable return... However, now my eyes on CLDX- this I believe where a lot of money will be made in the same 1-2 years...