What is interesting about this merger is the amount of added money that Abbott is putting into the deal.
Abbott said it would acquire Facet for $27 per share in cash for a net transaction value of approximately $450 million, which includes a purchase price of approximately $722 million less Facet's projected cash and marketable securities at closing of approximately $272 million.
I mean the stock closed trading at $16.21 and Abbott came in with a 67% premium to that price in their buyout offer. That is quite a big premium. Abbott is not even getting any Phase 3 drugs in the deal. Facet is mostly made up of Phase 2 and Phase 1 drugs. Abbott paid that premium simply for the pipeline. Imagine how much of a premium they would have paid if the company had some Phase 3 drugs in that pipeline?
I can understand Abbotts reasoning as well. They are looking at extra years of exclusivity that comes with getting a biotech drug approved. I mean many Big Pharma companies are already running into patent expiration for their blockbusters so they need to find new revenue streams. Abbott might be buying up to 10 years of extra exclusivity in this deal.
This might also be the first winds of a coming consolidation storm when it comes to Biotech. I mean many of these biotech companies have been burning their own capital for years to get their drugs to market. All Big Phama needs to do is write a big check and they can reap the fruits of the biotech firms labor for another decade. They just plunk down $272 million and they walk away with 3 or 4 drugs that have 10 years or more of patent protection.
In many ways this has the look and feel of when tech start-ups get snatched up by a Google or whomever. The interesting thing is that I don't remember many tech giants paying that much of a premium for their buyouts though. In fact Ebay only paid a 15% premium to acquire Paypal. I guess this means that biotech as an industry group is woefully undervalued.
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