billy,
Value of SEPR stock, plus converts, minus $500 million cash, is about $4.1 billion. A 20% premium gives us a $5 billion price tag. I agree that does seem like a lot for a company with no earnings model, despite the promise.
Would J&J pay that?
Probably the answer lies in their labs. If that work suggests the partnered molecules will live up to their billing, the thoughts of acquistion that must be floating around J&J HQ just might crystalize. Norastemizole is supposed to be the best of class when it comes to market. Norcisipride is supposed to replace Propulsid in its indication, as well as having other indications, that could make it a billion dollar drug or better. If it looks like Norastemizole really could rival or supplant Claritin ($2.6 billion sales) as the bestseller, J&J is looking at an annual royalty payment to SEPR of roughly $300 million. If Norcisipride works as well as hoped, it could cost J&J another $100-200 million annually in SEPR royalties. All together, $400-500 million is a good return on a $5 billion investment, especially since there are lots of potential kickers in the SEPR closet too.
An interesting question is what would happen to the Claritin deal? I can't believe Schering would just pay royalties to J&J as if nothing had changed. Is there possibly some sort of "change of ownership" provision in the deal? Any ideas?
Ditto Prozac.
I could live with a big chunk of J&J stock. If they were to pay cash, I'd croak.
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