While the initial benefit of the merger was to Sequanna's stock, I think Arris got the best of it longer term. The Arris advantages are the type that become apparent with the passage of time::
1) I have to agree with McCamant that having John Walker in charge instead of Sequanna's Kinsella is a major plus. Walker is, IMO, a peer of the Henri Tremeers and David Robinsons who will drive the sector over the next decade.
2) Both companies have been kept down by the (quite valid) criticism that they are so far from a marketable product. But the partnership potential of this combination is, IMO, greater than the sum of the parts by anyone's measurement. Also, future deals could include rights to Phase III products, similar to the "choice of drug" portion of the Ligand/Lilly deal, that could bring the new co closer to market.
3) The "merging of corporate cultures" concern that's been spoken of on the threads is a non-event. Guys like Walker solve junk problems like that before lunch-and the few hearts and minds he doesn't win over will quickly find homes in lesser biotech firms.
I've been out of both stocks recently, but took the opportunity to buy a position back in both after studying the deal. FWIW, the best play right now is to buy the SQNA, which appears be be at a slight discount to the prospective valuation of the new co.
Sooner than we expect, IMO, the new co will be at valuation levels equivalent to HGSI, and has to constitute a core holding of the compleate biotech portfolio.
One part I may have missed::Is Kinsella walking away, or will he be involved in the new co? |
