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

To: Biomaven who wrote (3763)	5/11/2001 4:22:59 PM
From: nigel bates	Respond to of 52153

However I'm not sure I can see the same breadth for most other genomics companies. My guess is that to the extent companies like GLGC (which I own) and SQNM (which I don't) have technologies useful to a potential acquirer, a simple license would be the likely outcome. Other genomics companies are so widely partnered (think INCY) that an acquisition by one company just doesn't make sense Doesn't that ignore the competitive advantage to be gained by being able (possibly) to freeze development on stuff that is partnered externally, while going ahead in house ? $600m or so is considerably less than 1 yr's R&D... how many LEXG / DGENs are there, for example ? The RSTA acquisition must be causing disquiet in some boardrooms.

To: Biomaven who wrote (3763)	5/11/2001 8:19:40 PM
From: jj_	Respond to of 52153

Companies getting their buyouts/mergers in by June 30th May 4, 2001 Floyd Norris: A New Accounting Rule May Force Unnecessary Big Baths By FLOYD NORRIS ccounting rule making is a thankless task. Whenever the Financial Accounting Standards Board tries to change a rule that is being abused, companies complain to politicians. The politicians too often seem to think that the rules should make companies look good and that any rule that might hurt a company's stock price is an attack on American capitalism that will destroy the competitiveness of American business. So it seems churlish to criticize the board just as it is finally nearing the end of a long process — started more than four years ago — to reform accounting for mergers. If all goes as planned, no merger announced after June 30 will be able to use pooling of interests accounting. That means companies will no longer be able to keep the costs of acquisitions from showing up on their balance sheets. The changes will be made despite pleas from Capitol Hill, and the board deserves praise for that. But the changes also include adjustments to the way the other merger accounting technique — purchase accounting — is applied. And there the board has come up with a method that will be both more costly for companies to apply and less useful for investors than would an obvious alternative. The changes relate to "good will," the intangible asset that ends up going on books when a company is bought for more than the apparent combined value of its individual assets. Under the current rules, companies write off the good will over 40 years or less, thus reducing reported earnings. Many investors think that is nonsense, and companies routinely ignore the cost when reporting what they call pro-forma earnings. Under the new rule, amortization of good will will end. Companies love that, because it will increase reported earnings. But companies sometimes make acquisitions that do not work out, and the rules must deal with reporting that bad news. The new rule calls for assigning the good will to a business unit when an acquisition is made and then monitoring the value of that unit annually. If the unit is worth less than its book value — including good will and all other assets on the books — then it is time for a write-down. The rule will not be easy to apply, but it makes sense. Unfortunately, the new rule does not stop there. The company must then spend money to appraise every asset in the unit, including those, like internally developed patents and some other intangible assets, that are not now on the books. Then the value of all those assets is added up, and good will is written down sharply. As a result, the book value of the unit will often be cut to well below its market value. "We think going to the second stage is unnecessary," said Dennis Garmer, a partner in Arthur Andersen. Ed Jenkins, the accounting board's chairman, says its plan makes good theoretical sense because it reflects how much the good will has declined in value. "We're not measuring the value of the unit," he said. But that is the information that would be useful to investors. Instead, the board's approach will sometimes produce big baths that overstate the decline in the unit's value. Then, after the big write-off is taken, another decline in value might not lead to any write-down. Investors will hear worse news than reality one year and better news than reality the next. The rule will be a boon to appraisal companies. But forcing companies that are having troubles to spend money on appraisals so as to provide less useful information to investors does not make much sense. Reconsideration may be appropriate before the new rule is finally adopted. Home \| Back to Business \| Search \| Help