ok.. why would a company ready to pay 3-5 million upfront + milestone payments + royalty payments in the future offer only $1.75 for for a buyout ?
Thats selling "Two advanced clinical drugs" for roughly just $18 million.
On the other hand you might end up paying 7-8 million anyways to NTI for the drug development process and stuck with royalty payments whatever those maybe in the future if the drugs were a success.
I think the problem here is you are looking at a cash buyout from a small pharma.
Remember Frieman keeps saying and we keep hearing of a major pharma.
Take for example a Warner Lambert (it doesn't have to be that big but..) that has 823 million shares outstanding and its priced at 65 bucks. its daily swing is more than 1 Billion in a day and we are talking about a measly 50 million here...For them its like simply issuing 800,000 shares, a drop in the bucket, in excahnge for NTII and NTI will be valued at more than 50 million.
I might be naive in my thinking that such a negotiation is possible under the facts that
#1. Neither Memantine or Xerecept have been FDA approved yet
but then thats the beast of the business and thats what WLA is in.. so
800,000 shares might not be a big deal if it means 2 drugs for WLA..
#2. The potential Memantine revenue stream to NTII esp. after the deal with Merz is significant enough to generate such interest in a big pharma (?)
#3. That another company would be willing to pay 400% premium for NTI.
In any event I would take a buyout over a marketing agreement.
Simply because a buyout will be at a higher price than the pop and dump you will get on the marketing agreement. Even if Memantine becomes a cash cow in the distant future, NTI will remain at 2 or 3 drug company, relatively low earnings, low PE, NO GROWTH, hence undervalued, less than 7-8 bucks per share. Heard the CEO say before, that the biotech industry needs some consolidation, NTI eventually wont be able to survive on its own, and NTI shareholder would be better served by a buyout deal at this point than 2-3 years down the road. I'll take door #1.
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