Many people tell me the Japanese do business differently. Often those same people can't exactly explain why they do things the way they do, other than culture.
I can't explain why DS wouldn't have bought out Biota by now.
DS co-own LANI. They completed the clinical trials to registration and then marketed it themselves in Japan. It makes them money: maybe not a fortune, but a good revenue stream. They know the margins.
Interest rates are zero and the yen is flowing freely from the printing presses.
DS have a presence in the United States.
Biota currently holds the financial capacity to complete clinical trials in the US, and is looking to market it themselves. Biota will be coming to DS to settle a royalty deal.
And Biota have an enterprise value of about 50 million. 50. Maybe 2 bucks a share.
Why wouldn't DS buy Biota and get on with marketing the compound themselves in the US?
Why would they settle on a 10% royalty? Why would they agree to any royalty deal when for a relatively miniscule amount they get a funded and established clinical trial program for a drug they know well, a manufacturing agreement for compound and device, and a revenue stream in 3 years? They must know the company still has little profile in the market and the Aussie investors will probably take a cheque if it's reasonable.
This is a compelling business case.
At 10 per share it would cost them barely 300 million.
At 10 per share, they get 70 million in cash and the balance of 230 million grant (with a 7% administration margin). And at 10 they could claim they are paying over 100% premium to market.
And most importantly, I don't know if there would be any other buyers in the market, so no auction.
For us, 10 per share is still less than the amount the ASX listed Biota reached on the day it announced it had won the BARDA grant for LANI. Those long toothed Biota holders wouldn't see it as a win.
But that's not my point here - my point is about DS.
Well known, but good point. CEO is probably going to try and get bidding war. DS would enter if other buyers show interest. Right now there is no rush.
ReplyDeletewhy do i feel this is just you and me on this blog!
ReplyDeleteI'm convinced DS will take Bota eventually. But probably after Phase 2 results to confirm Lani does the business in non-Asians. They will have to pay a little extra but the Japanese are a cautious bunch.
ReplyDeleteI wonder how you can be so sure. DS have had ample opportunity, and have shown no interest. They could have made a play at the time of the Nasdaq move.
ReplyDeleteThe only problem with the patient approach on their part is that useful patent time gets wasted.
George: you might be right! That's part of the problem with this company and its smaller shareholders. It's what has allowed the management to essentially lead the company by the nose for so long.