Matt all good strong stuff and well researched as always.I will...

Matt all good strong stuff and well researched as always.

I will point out my valuation for ACL Fonda day 1 as stated yesterday is 45c. Not too much different to your 5 or 6 times 9c in scenario 3.

Maybe you missed my point slightly or more likely I was not clear. I was not suggesting that there would be more generics in 3 years. However is not inconcievable that there could be one or more in the FDA pipeline at that time.

In fact you'd concede I hope that the more likey your scenarios 2 and 3 become and the fonda pie gets bigger the more and more inevitable it becomes that other generics will enter. The bigger the market the more viable it becomes to get in and canabalise a few percent of market share.

So we come back to the original hypothetical question. Its now Fonda Day1 + 3years. What multiple will a new buyer pay for the future earnings?

In your best case scenario it 5 or 6 times 10c. I absolutely hope you are right.

But the worst case has to be that there are other generics on the horizon, and fonda runs the risk of becoming a commodity sold on skinny margins. With low forward earnings on a canabalised single product the PE might be 2 or 3 and the resulting SP pretty grim.

We are all in this together and hope for the best but an investor who doesn't consider the worst case scenario is courting disaster.

Clearly I love ACl but hate the split. There is, and always was, a risk that Fonda could wither on the vine. In the undivided enterprise this was acceptable because so long as the Fonda revenues held out until Hyact was proved-up it had done its job. Like a booster rocket on an Apollo mision it could be jettisoned when we were well on the way to the moon.

Management has proposed that a good percentage of the money we have invested in ACL to date is tied to that rocket. I just hope we are not waving goodbye to Orbis and the SI's as they head for the Sea of Tranquility as we plummet back to earth with a thud.