Greg,
I've had four biotech stocks bought out from under me (Hybritech, Cetus, Applied Immune Systems and Genetic Therapy.) I'm just eyeballing it based on past experience.
I think the explanation for AGN getting more favorable financials is simply LGND needed to do the deal more than AGN.
Another thing people seem to be ignoring is just how much money its going to take to support the pipeline LGND has. Consider: their recent burn rate is $10 million a quarter (and remember the off-balance sheet contribution from ALRI was partially holding that in check) and likely to go up geometrically as more products reach advance in clinicals. Even $50 million in cash (net, e.g., the $100 million we were talking about recently) will only last a year, at a burn rate well below what is likely to be current. If several products start moving in parallel in late stage clinicals, I could easily see the burn rate rising to $20-30 million a quarter. Now I admit, a diabetes partner will shoulder a lot, but my experience is that those expenses are primarily for their own people and with all the other products LGND wants to advance, I can't imagine Ligand cutting staff. Quite the contrary.
Then, there's the dark side of Ligand's cash position. All the people on the other side of the table can read financials as well as you and I (probably better than me.) They recognize that delay puts that much more pressure on the Ligand's financial team. I think before the ALRI call, that Henry's scenario was the most plausible. But Ligand now has to have a lot of money and it has to have it fast. Or, they will have to dilute their stock and suffer a real black eye. The diabetes deal, with the ALRI requirement for a significant amount of cash, simply doesn't provide money enough for the burn rate. I don't think Robinson has a choice. |
