VincenziniHologic is acquiring Thirdwave for US$580m...TWT is...

Vincenzini

Hologic is acquiring Thirdwave for US$580m...TWT is actually still burning cash and hence a EBITDA multiple is not applicable. In such a case its best to look at revenue multiples.

According to Morgan Stanley report on the deal, TWT as part of Hologic, will do HPV revenues in 2009 of approx US$47m growing to US$90m in 2010. TWT as a stand alone were projected to only do HPV revenues of US$21m and US$38m in 2009 and 2010.

Hence as a stand alone the revenue multiple is 27.6x 2009 and 15.3x 2010 revenue.

The difference is the 'incremental synergy revenues' that Hologic can extract by putting TWT's HPV tests through its established sales channels. The revenue multiples in this case are 12.3x and 6.4x.

From memory Digene was acquired by Qiagen on a revenue multiple of approx 7.3x forward year projected sales.

So assuming that GBI can sell say 1m tests in 2010 at say 7.0x revenue GBI would be valued at about $109m or $2.13 per share. Based upon the projections on page 19 of the GBI presentation this would be about 14.1x EBITDA. This is a fair sanity check.

re the $900k costs I assume this is for CT/NG and the PapType 3-in-1 test and to compare apples with apples they should also add in revenue from these tests otherwise they are understating profit. Maybe they're just trying leave some fat in there so that they don't need catch the perfect wave to hit their numbers.

My understanding re the large US clinical trials will be largely funded by the 2009 option exercise proceeds of $12.8m. This wil be a 'one off' expense (and maybe even capitalised in their balance sheet) and so it is right to normalise this out of ongoing profitability projections.

trust this helps