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

To: DewDiligence_on_SI who wrote (16787)	5/15/2005 5:31:37 PM
From: Biomaven	Read Replies (2) \| Respond to of 52153

Well the back-of-the envelope calculation on Risperdal Consta is that this is heading to be a $1+ billion drug and ALKS gets about a 7.5% royalty on it. So JNJ would maybe pay around 20 times the royalty rate (JNJ's current PE multiple) at peak to be earnings neutral on an acquistion. (That's about $1.5 billion). So at peak sales it's likely worth a bit more than ALKS' present market cap. So then it's a question of what discount rate to use and what exactly you think peak sales are going to be and when they will happen - the drug is growing really quickly. So I grant you it's some hyperbole to say that this covers the present marekt cap of ALKS - but at least it's in the same ball park. If you add Vivitrex in, then I think you easily get to the present market cap, and leave the rest as the free option. Peter