This proposed buyout is, at best, poorly timed and ill-conceived.
The company has just barely started to show some AmBisome revenue momentum in the US with this little Q4 preannouncement that now looks like covering fire for the action in the stock rather than the real
reason the stock moved. The company would be worth substantially
more after Q1 with visible '99 revenues of at least 150M+.
Without Iterex Technologies as a boat anchor this stock is worth
$18 from AmBisome alone as it should earn .60/share in 2000.
And that's based strictly on AmBisome sales. What about MiKasome?
Let's face it, one of the best things about liposomal companies
is that if they pick the right target market (like not Kaposi's Sarcoma) they basically can't lose. MiKasome should be a bigger
drug than AmBisome and this offer, for all intents and purposes,
values it as $0. You can discount future revenue and earnings
all you want but you still can't work it down to $0.
It get's worse. Right now Gilead stock is being pumped up big time
by expectations for PREVEON for the treatment of HIV and RS4104 for
the treatment of flu. The company has about a 1.3B market cap
and 300M in cash.
The problem is that PREVEON doesn't have a compelling story behind it; HIV is already being treated effectively with protease inhibitors. That's why DaunoXome is a non-factor for NXTR and why VISITIDE is
a money pit for GILD. The potential for protease inhibitors to fail
as an effective treatment for PREVEON has not been demonstrated and
there are already multiple protease inhibitors on the market in any
case. PREVEON has only be tested in conjunction with protease inhibitors and therefore it can only exacerbate the cost problem
with HIV treatment so it's very unlikely to generate much revenue in the foreseeable future.
When you read about PREVEON, think DaunoXome.
Which brings us to RS4104. RS4104 is an oral treatment for flu. In
order to get it approved they are going to have to show that people actually feel better and that the flu symptoms are reduced. I.e.,
you get better faster. This is the problem that Glaxo-Wellcome's
Relenza had and why the FDA didn't approve it. There is, however, some minor evidence that the RS4104 NDA will be stronger in this regard. The other part of the equation is that you actually have to show up at the doctor's office within two or three days of getting the flu to get a prescription. This is a problem.
Will your HMO encourage you to crawl out of bed, drive to the clinic and, if diagnosed correctly, might make you feel mildly better?
This is not a clear-cut sale.
If RS4104 fails to get approved or fails to sell well during flu
season ...
Did I mention that sales are seasonal? Won't be approved
until after this year's flu season? Hummm.
... it will not be pleasant to own GILD.
Some of the mostly likely paths in the next few months led to GILD being a $15 stock. That makes NXTR look like a $7 stock again.
How does this buyout proposal make any sense?
I read in some older SEC filings that Warburg, Pincus was
doing some restructuring so they could liquidate part of their
holdings. Perhaps this is related.
I think NXTR is clearly better off as a standalone company
if this is the best we can do as shareholders. This buyout proposal should get shouted down at this price. |
