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Biotech / Medical : Munch-a-Biotech Today -- Ignore unavailable to you. Want to Upgrade?

To: rkrw who wrote (2533)	4/22/2008 12:52:34 AM
From: pgo-neil	Read Replies (1) \| Respond to of 3158

What do you think Merck's definition of midcap is? Good question... Over the last 2 years, they have made 4 all cash purchases; Abmaxis [$80M], Glyco-Fi [$400M], RNAI [$1.1B], and Nova-Cardio for $350M. But none had products, let alone near term growth... Not all had pipeline either, some were platform technologies. So, Existing product(s) with growth plus a decent pipeline seems to be what they're looking for I am guessing that they would need to pay about 6X for revenues plus cash plus some premium [range 20 to 50%]. They have about 8+B in cash, so they could spend something like $2.5B net cash without raising too many eyebrows. MRK has bought companies they have a relationship with, so three that haven't been mentioned yet; 1. Aria [could be had pretty cheap.] No products with revenue, They seem to have some clinical and pre-clinical products. 2. SurModics [SRDX] has a market cap of about $800M with about $80M of sales and $26M of cash; so this is already about a 50% premium to 6X Revs and cash. Have no idea about the pipeline. 3. VRTX... almost too big to swallow at a current market cap of about $3.5b. But they have about $200M sales and about $460M cash, so 6X Revs plus cash is leaves about 100% for research and market premium... I think this would be the high end and they would need to add another 20% [or better] to get any consideration. From what I have read, they would probably have to make Boger the next CEO of MRK to get it done. Almost all the big pharma still have their piles of cash intact and so can move to make deals even in a credit constrained environment. But maybe they wait til an attractive company has a hard time transitioning to profit and can't pay all the bills for research. Interesting problem... Looking forward to other thoughts. graham --