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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: nigel bates who wrote (1081)	5/11/2000 4:12:00 PM
From: Biomaven	Read Replies (2) \| Respond to of 52153

Every now and again we get some comparatively objective evidence of a biotech's value. The best examples are of course munches. However, next best is a MLNM-style deal like that VRTX recently inked with Novartis. What is interesting about the deal was that it was a discovery deal - in other words the compounds of interest don't yet exist. (Each company's existing compound in the field of the agreement was excluded). Further, it doesn't seem to be based on any obvious tangible VRTX asset, like a patent. Rather it was based on the judgement by Novartis that Vertex could develop kinase-based drugs better than Novartis could themselves. (And remember that Novartis is a leader here themselves, with their very exciting CML drug). Now because the deal is complex, it's very hard for an outsider to put a dollar value on it. $18 million upfront and $200 million research funding over six years seems to be the minimum, with substantial ("comfortable double digits" was the phrase used in the CC) royalties and milestones to follow if they are successful. So it's hard to tell if the NPV of the deal to VRTX is $100 million or $500 million. However, what is clear is that a "hidden" value in VRTX has emerged and has been validated by a pharma's cold hard cash. What other such hidden values are still lying around unnoticed in VRTX and other biotechs? BTW, I added to my VRTX position on the news of the deal. Peter