The market responded to the aforementioned acquisition news yesterday by penalizing Takeda 2%, even after the announcement it would also buy back a significant number of its own shares. The move comes as company fights to lessen the impact of projected revenue lost by the patent expirations of Prevacid and Actos in 2010 and 2011 threatening to wipe out ~$5B in sales.
Still, it seems I’m not the only puzzled one in the ~$9B, 53% paid by Takeda for Millennium (see here and here for starters). Now, I realize the math is a bit more complicated that this, but by my basic calculations (assumptions: patent loss 2017, CAGR 20%, 400M sales 08) the NPV of Velcade is not more than $5B, which means $4B is the value left of the table for the rest of Millennium’s pipeline. Keep in mind, the pipeline is still risky; the company has no drugs in phase III (though their a4b7 integrin for IBD will enter soon) and has only a few risky compounds in phase II. To put $4B into perspective, the day before the news was announced, the entire company had a market cap of just over $5B.
Maybe Takeda and Millennium know something we don’t?
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Eben is a highly caffeinated business development associate at a small, cash sensitive pharmaceutical company somewhere in Massachusetts. He enjoys cliche-less banter, compartmentalization, non-equilibrium thermodynamics and NPV analysis. Agree or disagree with what he's posted? He encourages comments.
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