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

To: Renee who wrote (286)	3/16/1998 12:59:00 AM
From: John Zwiener	Respond to of 1025

Renee, you posted: >>>An interesting article appeared in the Financial Times. The headline is Roche cuts $800M off BM price. The original deal was negotiated at $11B but was later reduced to $10.2B citing certain price adjustments. If one assumes that BM's access to the Origen technology license makes up a significant portion of the value to Roche of the BM acquisition than a reserve of $800M indicates that the stock still has ample upside near term. Of course the entire reserve may not apply totally to Igen but if it does....<<<< That would put a value of $47/share for the Roche/BMG license to Igen. That's getting closer to the bottom line value, but as James points out, they probably aren't too interested in selling. As that analyst pointed out, they can probably get 20% of the 6 billion market. And 9% of 1.2 billion is 108 million/year royalties to Igen, or $6.30/share. At the industry PE of 27, that's a share price of $170 (a lot more than $47 in a buyout). Also assuming that Igen's growth rate may continue to be above average, conpared to the testing biotech industry, the PE may well be higher. (In 3 years) (price should move ahead of estimated target by 1-2 years, so this kind of price could be seen in a bit earlier) Plus there is the high thruput and residual DNA that may do well. POC should have had deals out there for almost 3 years and should be showing what they are doing. And of course, there is an endless number of possibilities to apply Origen technology to areas where the competing technology is not adequate. The High thruput area is new but is growing very fast and Igen is likely to have a solid niche, because it works better. This is important in areas where results are subtle and clear testing results are the only way to get accurate numbers. The numbers of new compounds and targets has massively exploded over the past 2 years, and it exponentially increasing. Because manufacturing or synthesizing or isolating these targets in incredibly expensive, the ability to see a reaction from only affecting a few of these molecules cost effectively) is an advantage that is at least 2 years ahead of the next competator, in my opinion. Though the total dollar amount may not be as big as the clinical market, yet, margins should be better than 9%. So this is my reasoning that the High thruput market could rival the clinical market. The POC is something I have previously given no value to, but with the ECLM module and miniturized computer techology, it has the potential to become a big deal very soon. Resistance to POC has been due to strict CLIA guidelines that make it difficult to maintain compliance out of the lab setting. A self contained instrument that took care of this and could use whole blood for testing could do well. Also, the lehman rumor, they have been around for 9 months or so. I had forgotten about that. So it probably doesn't indicate some kind of pending deal as far as a buyout of the license for clinical labs, I guess. But James, remember how SEPR spun off chirex?, it seems like it might be a standard consideration to do something like spinning off a piece of Igen, though hopefully, the shares would be put in shareholders hands if they did something like that. I don't know much about tax specifics on deals like that, but I would guess that a waiting period before selling would be necessary, so that backs up no sell off of the part of license that Roche has is likely for at least 2 years. But by then, a sell off would not be a good idea since we can guess that the stock price would be higher due to the revenues, than could be realized from a buyout of the license. So no sale. If you read all that stuff above, you may see that it can be seriously considered that the minimum value of Igen may need to be dramatically increased from 45. A little time will be necessary to put an increase value into slam dunk catagory, but it sure is close to that. Regards.