Morningstar $2.10 valuation, page-72

"Partnerships are the answer. I see this type of funding as a back stop support that i hope will never be used."

@Barman76,

I am saying exactly the same thing.
Not roughly the same thing. But exactly the same thing.

MSB needs a partnership urgently because resorting to an at-the-market equity finance facility will be a bad thing.
A very bad thing.


"If you don't like this method what alternative would you propose."

I don't know of any alternative funding solution for a company in MSB's particular financial situation.
And that's the very issue that I have with the stock and why I am not a shareholder.
It is because the company is under-funded.


"Its easy to find a concern in anything. You do this very well."

Well, in this particular case, MSB management has spoken about potential partnerships being at an advanced stage for several years now, but none has materialised.

In fact, one partner has formally disengaged and another prospective partner - which I thought would have been a sensational partner for MSB to have, namely the very high-quality, capital-rich Celgene [*], appears to have disappeared from MSB's partnering agenda after conducting at least 12 months of due diligence.

In the context of what has been posted in preceding sentences, these things might not be grounds for concern to you, but it happens to be something that I do think and worry about.


[*] Celgene would have been a beautiful partner. For, unlike the vastly inferior and financially challenged Mallinkdrodt, Celgene is a US$100bn financial powerhouse. Annually, it generates some US$12bn in Revenue, US$11bn in Gross Profit, spends US$4.5bn in R&D (that's right... US$4.5 billion), and generates EBIT of over US$3bn.
If generates US$4.0bn in Operating Cash Flow and consumes just US$0.3bn in capex, so its Free Cash Flow is immense. It has bought back US$8.0bn of its own stock over the past 3 years alone, leaving it with just US$8.0bn in Net Debt, compared to a $100bn market cap (Mallinkrodt's Net Debt exceeds its Market Cap).

Now that's what I call financial potency.

But despite the company's surplus capital generation of billions of dollars per year, the Celgene board has not seen fit to venture even a mere 5% (US$200m) of its Free Cash Flow in a partnership with MSB.

All they did was, two years ago, they subscribed for US$45m of MSB stock at the then-price of A$3.80/share and were granted a 6-month right of first refusal over certain MSB development products, which was extended for a further 6-months. But since then, nothing whatsoever has been heard about them.

Forgive me, but that sort of thing does cause me some worry.
I can't see how it cannot do the same for most people.