This analysis is good but requires some clarification as the sales royalties may be much larger than what is projected here. Below are the terms--please note the 10% above $3bn which is excluded. Also note that the royalties are extended 5 years (until 2030) as long as sales stay above $1 bil. I wrote here on 10/12/12 that my discounting lead me to believe that CELGZ was undervalued. Today I feel the it is AGAIN EVEN THOUGH IT DOUBLED. Why? Because I think there is a greater than 75 % chance that the trials pipeline will add several more platforms---melanoma, etc. I believe that prior approvals will get to $1bn + and so will Panc. So were at $2 BEFORE some very large markets likely will be added, and well before the "sunset". Should we reach $4bn--possible before 2020--then we could get $275mn annually for 10 years. That's $6.39 x 10 = $63.90 per CVR. Prior I expect that $2.5bn is easy by 2017 which would payout over $1 per CVR and climb---perhaps they payout $7 per CVR upto 2020. In total we could get more than $70 PLUS the $6.93 Panc milestone in return per CVR through 2030 if Abraxane is the blockbuster I believe it is. For the record I am sceptical that they will make the April 1 milestone---but maybe if someone kicks the FDA in the #$%$---not at all likely tho--. Regardless, approval and $6.93 is NOW 99% done and any discount to $7 is a BUY as my NPV is now $11.
Milestone 2: $300m cash upon approval of ABRAXANE by FDA for pancreatic cancer with overall survival claim in US label
o Milestone 3: $100m cash payment upon FDA approval of ABRAXANE for pancreatic cancer if approval comes by April 1, 2013
o Milestone 4: Potential cash royalty payments upon achievement of certain ABRAXANE and nab-pipeline products net revenue
§ 2.5% of revenue between $1bn and $2bn
§ "additional" 5% of revenue between $2bn and $3bn
§ "additional" 10% of revenue above $3bn