exp I doubt you can use P/S with biotech, in most cases they are valued on drugs in the pipeline and the market potential for those drugs, not actual sales. Recent acquisitions have gone at better than 5 times perceived market for the leading drug in the pipe line. (In the case of IMCL even more, I think that the perceived market for their colon cancer drug is about $.5 B/year, but BMY paid $1 B for 20% of the company (or a valuation of $5 B, or ten times the perceived market), not counting another $ Billion in "progress payments, and they retain on top of that some 40% of the future profits. Take the last item as "compensation" for the "progress payments".
A ot o people are going to say (rightfully so) that this was an excessive price to pay, but that is the current "reality", and typically, when a wave of consolidation in a market segment starts, valuations paid (particularly when paid with paper rather than cash as BMY did) tend to increase through the mania, not decease. In any event, one thing you can be sure, sometime in the near future, BMY is going to take a loss on their book for that 20% stake, unless of course, IMCL once more goes well above $70 before BMY closes their quarter.
Zeev |
