V1,
I agree in principle, but I don't agree with your numbers. Suppose we use an estimate of $31M in revenues for ADCON-L in 2000. ADCON-L has a potential population of 450K. Add up all the other ADCONs assuming equal penetration and revenue per operation, you end up with a revenue of $476M per year. Yes, I'm making assumptions, but I see nothing wrong with them. I'd even wager that market penetration will be better for the rest of the markets. Say you assign a market capitalization of just 1X revenues. Then it should command at least $476M. With 10M shares out, that's close to $50/share of market cap and I really wouldn't want to sell that off quite so cheaply. If they kept it and got a more reasonable multiplier like 5X, you're looking at $250/share for ADCON alone. Yup, it's going to be a couple of years, but there'll be rapid growth for quite some time and that tends to get an additional multiplier. Last I looked, biotechnology companies were valued at around 20X revenues. That would be a monster valuation for this one.
So yes, sell it off, but for a major cash payment up front combined with a long-term royalty and development deal. Or, assuming they can get enough cash flow to fund their research, spin it off as a separate company in a public offering. They'd still be able to retain control. Leave the subsidiary in Ohio and move Gliatech itself to the West Coast so it can be recognized as a real biotechnology player!
Thanks, Torben
P.S. Do you see anything wrong with my numbers? I did the arithmetic twice and it looks like we have a population 15 times as large as the ADCON-L one that we haven't even started tappin yet.... |
