Dillon,
I'd like to elaborate on some of your comments and correct some inaccuracies:
You said
Why sell at 21:
1) Dilution of PCOP stock. 8.5 million share dilution.
This acquisition is expected to be accretive to shareholders, NOT DILUTIVE. Previous estimates of ($0.50) and $0.02 for 1998 and 1999, respectively, are now ($0.01) and $0.45. These projections represent a significant improvement in operating performance.
2) If price stays at 21 the acquisition would cost PCOP shareholders $180 million!
If the stock remains at $21 (although today it closed at $19.69), the purchase price will indeed be somewhere around $180 million. This price of approximately 3X 1997 revenues still compares favorably to the market cap/revenues of a group of comparable companies which is 5.1 times revenues and the prices of a group of recent similar acquisitions which is 4.2 times revenues. So we think we actually will pay a very fair price for MSI.
3) Insiders sold at $15 and $18 (Lewis J. Shuster sold at $18, Chabala John sold at $18 and twice at 15 on date 11/97.
I believe it was actually back in 11/96 that these sales took place, not 1997. Lew sold a small amount for personal reasons and Jack retired and decided to take some profits. Both men still own a considerable amount of stock and/or options.
4) Merger agreement is based on a share price of $16.50.
I'm not sure what your point was here.
5) From the last SEC filing of PCOP: "The Company has incurred losses since inception and, as of September 30, 1997 had an accumulated deficit of $33.3 million.
The Company anticipates incurring additional losses over at least the next SEVERAL YEARS"
Clearly based on my answer is #1 above, this statement will no longer be true once this acquisition is consummated.
6) Consensus estimate for current fiscal year ( 12/98 ) : $ -0.42 per share
Again, based on my answer to #1 above, this clearly will no longer be true.
7) Alex Brown & Co reiterates strong buy because they are one of the underwriters of PCOP. They have a commercial interest in PCOP. Alex brown and the other two PCOP underwiters (Cowen & Co, UBS Securities) did sell at these levels. If they sell I am not going to buy.
The underwriters didn't sell stock. They simply acted as a broker between Pharmacopeia and the investment community. Also, please consider Lehman Brothers, Everen Securities and OrbiMed partners. Each firm has a buy recommendation on Pharmacopeia and has no current "commercial interest" in PCOP.
Hope this helps.
Sue |
