Ligand (LGND) Breakout! Message Board

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Biotech / Medical : Ligand (LGND) Breakout!

LGND 194.74

-0.6%

3:02 PM EST

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To: Henry Niman who wrote (24468)	8/13/1998 5:10:00 PM
From: growthvalue	Read Replies (1) of 32384

"The SRGN acquisition is supposed to be accretive next year, meaning that they are going to MAKE MONEY on the deal next year (which is why the ONTAK approval is part of the profitability formula for 1999)." Henry: "accretive" to earnings doesn't mean that it is adding economic value to Ligand. "LGND opted for the deal that would generate the most cash the soonest. They are buying SRGN with mostly stock and I believe that the future payment to LLY will also be as stock. Thus, LGND has elected to, in effect, sell some stock (at a premium) to generate cash." THIS makes sense. LGND has certain capital requirements that they need to meet. The SRGN option may be the least expensive way for them to raise the capital they need when they need it. But make sure you understand the difference between generating cash and generating economic profit. If LGND didn't need to raise this cash, the extra royalty would OBVIOUSLY be the better option. This would be added value to Ligand - extra royalty without giving up anything for it is instant value.

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