There's been a lot of speculation on RAC receiving a low bid in the form of a premium to the trading share price, which i just cant seem to find evidence that is how things are done. In an effort to understand more about acquisitions and how they were formed & based off what metric, i compared only 10 that i could find estimated revenues for.
The eventual value was often 2-8x estimated peak revenue, in fact I couldn't find anything that was sold for below 1.4x peak revenue.
What was clear is that in reading articles, its typically reported as the sale price being a % premium to the prior closing price, but not what the offer was based off. I haven't found any evidence that buyouts are based on an arbitrage premium over the trading price, but that the premium is more related to potential or estimated sales of the drug. If anyone has come across anything different, please share
We have to remember that many of the companies in the headlines, are often trading at, close to, or over its annual peak revenue figures, and that by BP making an offer, its based on this and not the market cap at the time.
Example below: Horizon bought for $27.8b at a 48% premium, now on the surface that sounds like a low premium. But the sales generated across all 3 products in 2021 was less than $2B, and Horizon peak sales was estimated to reach close to $10B. So was it actually a 48% premium or was it a 2.8x estimated peak revenue?
Another example of a 101% premium, however the deal price was 2.2x estimated peak sales
122% premium, however the deal price was 2.6x estimated peak revenue.
The huge $74B Aquisition of 2019? The deal price again was 2.9x Estimated peak sales
Another thing that i found interesting, is drugs that had multi indication potential, or in the RNA space, commanded much higher premiums such as the below, trading at 16x its projected sales.
"Alnylam Pharmaceuticals is an RNAi drug development specialist. The core concept behind RNAi is to silence genes associated with human disease. To date, the drugmaker's novel platform has yielded five approved therapies: Onpattro, Givlaari, Oxlumo, Amvuttra, and Leqvio. The biotech also sports five late-stage clinical candidates.
Why is Alnylam a possible takeover target? In brief, Alnylam's RNAi platform ought to generate multiple blockbuster products in the years to come. Moreover, these gene-silencing drugs have an unusually strong competitive moat due to their unique nature and outstanding clinical profiles.
Alnylam's shares are already trading at close to 16 times 2023 projected sales, A buyer, therefore, would probably have to be willing to pay up to around 20 times 2023 estimated sales (roughly $32.6 billion or about $272 a share) to win over Alnylam's key stakeholders.
The richest deals in this space have generally come in at around six to eight times peak estimated revenue"
If RAC have been able to validate Zantrene as an Anti-cancer + Cardio protect drug, and are able to explain and negotiate the potential use case's, I cannot see a case for recommending an offer for the full IP any lower than $79.03 as a base case.
Thats before removing assumptions, scaling into other markets outside of the USA, or even looking at other indications. i would welcome some other evidence to discount any of the above as i just cant find it.
