Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: WTDEC who wrote (21356)	5/24/1998 2:11:00 AM
From: Flagrante Delictu	Read Replies (2) \| Respond to of 32384

Walter, The fascinating aspect of the SRGN deal is that LGND signed it as a two-parter, 2 weeks before the FDA panel meeting. To protect itself against a turndown by the FDA, LGND is on the hook for only $30 million (in stock)if the result is negative. On approval, LGND will be liable for around $60 million more, including $5 million to purchase the manufacturing division from Boston U. At that point, we would have a ready made GMP manufacturing plant with the personnel, equipment & know-how to produce the SRGN compound and possibly other LGND compounds at a favorable price. The question must be asked, why didn't we wait until approval before risking the $30 million? My guess is that the price of the deal then, in management's opinion, could have been appreciably higher, possibly because we might have had to compete then with other potential suitors. As it currently stands, LGND must believe that since there is no currently approved drug for CTCL, & since P3 SRGN results showed 30% of drug recipients achieved a 50% or greater tumor shrinkage, the FDA has little choice but to approve, despite less than desirable toxicity issues. I doubt that LGND entered this deal thinking they would bail out by selling $20 million of stock to LLY in Jan. to recoup part of the recent $30 MILLION outgo. It's a fallback position that they would prefer not to have to resort to. In the fall bio conferences, LGND raved about the chance to get this compound because it represented $50 million in annual sales. Lately, deals to buy compounds have been done at 5 times annual sales or $250 million for such a compound. We're going to get it for $90 million, including the manufacturing plant & rights. Moreover, since we were going to have a sales force for both Targretin topical & oral for CTCL, the incremental costs of giving them this compound to sell to the same oncologists should be minimal. Therefore, with manufacturing profits as well as marketing profits, hardly diminished by additional sales expenses, little or no royalties due anyone, and no effective price competition because we would control the only 3 (if approved) compounds for CTCL, and with these 3 targeting different stages of the disease, we might approach monopoly profits on all 3 compounds. H & Q might have to go right back to its' 84 cent estimate. If things break favorably for LGND here, with a rapid approval for all 3 CTCL compounds, this deal could be studied in MBA programs all over the world for its' brilliance. Moreover, if this fusion compound gets approved, the stage is set for approvals of other of the SRGN compounds based on this same principle. We're getting them all thrown in to this deal at no additional cost. Looks like we have a very low entry cost & an very interesting upside. DR has already won an award for the brilliance of the ALRT deal. Can another be far behind?