Monday, April 2, 2012

How much to pay for Amylin? Should we expect another CVR listing?


Exenatide franchise is the key lever of Amylin’s valuation. To get the buyer and seller reconcile on the valuation , is an onerous task due to the wide gap in the peak sales estimate that one can build for a product like Bydureon. One might sound equally convincing on a $6billion peak sales estimate as someone else estimating $1billion because of the vast variety of forces that could impact the peak sales. For the large pharma companies, both global and Japanese, Cash now is a scarce asset, and with patent expiry pressure at its peak, it is unlikely that they would risk this precious asset. There are buyers in the market, for whom Amylin kind of an acquisition could put them back on driving seat, but with so many uncertainties around the peak sale potential, they may not find it wise to stretch themselves too much.  The extent to which Amylin shareholders can bargain is also  limited by the availability of alternate assets that a buyer may be willing to pursue, if he is ready to take higher risk and is not looking for immediate cash flows. 
If Amylin shareholders accept the BMY offer, they may be end up leaving too much of value on the table. In such a scenario, where the buyer may not be ready to stretch too much, and the seller is concerned that he does not leave too much value on the table, we might see the deal culminating into another CVR issue to the shareholders

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