Yes, the just-reported quarter was very good. They beat my estimate by a penny and I targeted revenues to come in at $70 MM. They reported $69.4 MM, and the margin improvement more than made up for the minimal disappointment.
In Q 2, I have estimated revenues of $88 and EPS in the range of $.28-.30. The one analyst covering STS shows both slightly higher revenues and EPS and, while I'd be happy with my numbers, I'd be even happier with his.
For the full year, I'm using revenues of $302 MM and EPS between $.94-98.
Clearly, the company has gotten its act together, as I've previously commented.
The company still is on my radar as an acquisition target...but I've heard nothing to confirm or even suggest that. My EOY (end of year) target is now $15-18.
Of the ones I follow---yes.
However, I have no doubt that some smallish bio stocks (small capitalization, very low share price) will outperform SGEN....but the challenge amounts to a #$%$-shoot which I'm not willing to take. Buying a group of small bio stocks may hit one or two home runs but the losers will eat you alive and negate any positive performers.
At least with SGEN, I know what they are doing, have a decent sense of the end game and like both the management, the pipeline and the heavy involvement of those guys named Baker. That last point alone, increases my odds of success.
Maybe the President got canned because he mucked up the acquisition, failed to re-set the deal terms due to a loss of revenues. If so, I'd be OK with that; in fact, I'd actually be encouraged.
Don't know for sure but it's happened at other companies I've been involved with in the past.
Have done so already.. I would stretch to add below $30...if that ever occurs again. I'd be competing for shares with the Bakers....always fun.
My "projections" are based upon a comprehensive analysis of SGEN's drug pipeline, the likelihood of them having multiple billion dollar drugs in the marketplace in the future, the dwindling pipelines of many large pharma participants (and their likelihood of using their cash to buy drugs with a track record and an outstanding pipeline (cancer and other major conditions), and the fact that 65% of the outstanding shares are held by four institutions, with the largest slug in the hands of the Baker Brothers who have a SGEN Board seat and an insatiable desire to make a killing with their bio investments.
At the end of the day, investing is all about playing the odds...and I just happen to like the odds of what I am seeing.
$12-15 seems about right. There would be synergies (cost savings from eliminating duplication of certain functions and consolidation of some facilities, etc.) from taking out STS that could add incrementally to late 2016 EPS and thereafter.
REPOST FROM FEB 19th
Based on comments made in the full-year report issued yesterday by STS management, I'd say they have a decent shot at revenues of $350 MM in 2016 and an after tax margin of 5 to 5.2%. This should enable the company to earn a bit more than $1.00---my range is $1.02-$1.06.
Sales per share would be in excess of $20/share and ROI should be north of 12%, very decent for a minimally-leveraged operation. Less
REPOST FROM FEB 19TH
Several STS board members who own a significant share of the company's shares are 75+ age-wise and they're not getting any younger. They may have come to the realization a while back that it was time to dress up the company for a sale....and that's my bet.
Also four institutions own 27% of the company and I'm sure they've communicated their thoughts to management.
A good buyout would be north of $12/share
appears to be closer to reality than even I suggested.
Small investor stock (due primarily to lack of liquidity) now closing in on $10, I hold top the view that the fundamentals here continue to look very, very good and that this company may be a takeover candidate as many large board members are well up in years and would probably like to see this thing get sold.
With a decent shot at $1.00 EPS this year and sales per share, book value and debt all in decent shape, I'm now of the belief that we could well see $12-15 sometime in the next 3-6 months.
Here are the market caps of a few biotech leaders:
Amgen-----$ 109 B
SGEN's current market cap is today about $ 4.8 B
I would estimate that SGEN's private market/takeout value today is somewhere between $ 7 and $7.5 B---or $50-53/ share.
In 12-18 months, I value the private market/takeout value at $ 10 B---or $70+ /share.
In 36 months, the PM/TO value might get to $14 B---or $100/share.
I assume there will be no further share issuances and that the company continues to execute on its several drug development programs/clinical trials as communicated in public forums.
There will be several bio and pharma companies who are and/or will be looking to acquire one or more high margin billion dollar drugs and SGEN is in process of developing what the "market" wants and needs.
I do a lot of TA (technical analysis). So, if you look back to a past SGEN significant low accompanied by a large volume spike (August 2011), in the following 2 1/2 years, SGEN share price rose by 87% per year (for that 2 1/2 year period). If we apply that same metric to the recent high volume selloff and attach an 87% per year return to the next several years, after one year, you get a price target of $48+ and, after two years, you get to $90+.
Now, I'm not saying that this will happen again, but I am pointing out the enormous share price volatility that occurred in the past and.....history does repeat.....for those whop believe a buyout is the "end game," those are just a few numbers to contemplate as insider price objectives (Oh, and by the way, the three year price target reaches $170). I don't know what the Bakers' "plan" is but I think they have one and they're not in this for a modest return if history is any guide.
Also perhaps worth considering...1) they break up SGEN and sell separate parts of the company to two big pharma companies and..... 2) there will be a tax inversion element to one or more sales, lowering taxes on whatever profitability occurs down the road.(Right now, they have an "asset" in tax loss carryforwards....but they may be looking further down the road)....3) my most likely scenario is a sale to a single buyer around $90 share.
Actually, I love broken companies because here's where real research (the type of stuff I enjoy doing) really pays off. I'm a buyer here---and bought earlier today. I see a one year downside of maybe 15% MAX and a one year upside well north of 40%....$32 ++.
Longer term, I would not be surprised to see LCI acquired and I place their "takeout value" in excess of $50.
They will have to straighten up the revenue shortfall from the recent acquisition but I think that miss is baked deeply into the share price.
Last point---there's always the possibility of doing a tax inversion but I'm not counting on that.
So, to whom are you paying the $14? It's a "broker" or some sort of money collecting agency/company. Short-term taxes will also eat you alive. Just not my game....but good luck to you with your timing the swings.
How do you determine "an indication of a buyout.?" No one will tell you or us in advance.