Yesterday I provided basic outlines on how I believed BTA would be $9 in 2 years based on newly released production estimates from GSK's CEO Garnier. Today of course the world is a different place. Gilead have now settled with Roche for a rate that will probably be close to 19% rather than 10%.
Tomorrow, BTA and GSK sit down to discuss this vexed issue and GSK will be wishing they had settled last week. There is no way they will accept a measly $100 M. In fact they (assuming they have any negotiating skills at all) will be proposing a similar royalty rate to Gilead ie triple the current rate. There may be a lower outcome of course but there are plenty of contract manufacturers able to ramp up Relenza production (or at least Zanamivir production prior to the addition of the lactose used to pack the Discaler capsules - a high tech task that any half-witted CMO could achieve in about two days). So if GSK do not come to the party then I would strongly advise BTA to dump them and sign up with Joe Bloggs and Co tomorrow - they and others will all be lining up for the gig, have no doubt about that. It's time to play hard ball.
Of course I doubt GSK will run that risk - this is now a multi-billion dollar drug and sjhows no signs of stopping any time in the next several years - just the reverse.
I now personally expect Relenza to be fast tracked by GSK, to pay an increased royalty rate of at least 12% and thus I expect the share price to have the potential of reaching $20 in two years. A big call I know but while yesterday I said my holdings were heading for the bottom drawer for the next two years, this morning I'm adding a security guard! Anyone who sells now needs some serious attention a day before tomorrow!
BTA Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
