bz1516 Posted April 30, 2014 Share Posted April 30, 2014 Anyone following this newly public company? It was founded by the former founder and CEO of Paladin Labs, who recently sold out to ENDP, after building a $2 billion company in less than two decades. The company is essentially trying to pick up where paladin left off, doing very similar things, without of course the legacy earnings stream. The company raised over $250mm net on their balance sheet in two quick offerings. In addition they have an asset to sold in the not to distant future of an FDA voucher for expedited review. This has a valuation of based on three analyst reports of anywhere from $10mm to $300mm. I did a quickie analysis and came up with $100mm. Adding the value of the voucher, to be monetized in due course, with the cash puts a TBV on the company of ~$4.50/share. The current premium based on a price of CXAD5.83 is 1.3x TBV. In a nutshell. Company goes public two months ago. Raises over one quarter of a billion dollars. Repeating same business model of successful low risk company sold for $2B. Brings on some of the old team. Starts off with valuable voucher. Paladin multiple of BV was many times TBV. So, I ask the question, where do you get a "story" like this for 1.3x TBV? Link to comment Share on other sites More sharing options...
Liberty Posted April 30, 2014 Share Posted April 30, 2014 It's on my 2nd level watchlist. I'm certainly interested in learning more about it, as I really like that model. One worry is that the CEO might not be at his peak performance (wasn't he on medical leave for a long time after a brain injury?). It's a bit delicate... I'm not sure how to find out more about that. Has this been covered anywhere? Link to comment Share on other sites More sharing options...
Liberty Posted April 30, 2014 Share Posted April 30, 2014 Thank you very much, 50centdollars, that was very helpful. Link to comment Share on other sites More sharing options...
bz1516 Posted April 30, 2014 Author Share Posted April 30, 2014 One worry is that the CEO might not be at his peak performance (wasn't he on medical leave for a long time after a brain injury?). It's a bit delicate... I'm not sure how to find out more about that. Has this been covered anywhere? I spoke to him about 10 days ago on the phone for 5 minutes. He sounded like any other CEO. He answered my somewhat probing questions very well. He was very gracious. No traces of any problems whatsoever. Link to comment Share on other sites More sharing options...
Drokos Posted May 1, 2014 Share Posted May 1, 2014 He has admitted that he is not, and will never again be, 100%. You can not compare the P/BV ratio of a pile of cash (what GUD currently is) to the P/BV of an operating pharmaceutical company (Paladin). Well you can, but it's foolish and doesn't actually provide any value. I'd take the under on the value of the voucher. For 1) these days almost all blockbuster potential drugs are treating some sort of rare disease/oncology so they will get some sort accelerated approval/breakthrough status so the voucher will be of no use to them. That means it will likely have to be used on a me-too drug with peak sales in the hundreds of millions, which means the value of a faster approval is significantly lower than it is for a blockbuster. 2) there are some issues, such as the fact that you need to alert the FDA a year in advance of the day you want to file in order to the voucher, which limit the desirability of the voucher. The pediatric priority review voucher that Biomarin received has less restrictions and will be more valuable. Full disclosure: I am long a small position. Hoping to get a more material position if this converges to the cash value. I think there is too much optimism surrounding the voucher, so there's a good chance the sales price disappoints. Link to comment Share on other sites More sharing options...
bz1516 Posted May 1, 2014 Author Share Posted May 1, 2014 He has admitted that he is not, and will never again be, 100%. You can not compare the P/BV ratio of a pile of cash (what GUD currently is) to the P/BV of an operating pharmaceutical company (Paladin). Well you can, but it's foolish and doesn't actually provide any value. I'd take the under on the value of the voucher. For 1) these days almost all blockbuster potential drugs are treating some sort of rare disease/oncology so they will get some sort accelerated approval/breakthrough status so the voucher will be of no use to them. That means it will likely have to be used on a me-too drug with peak sales in the hundreds of millions, which means the value of a faster approval is significantly lower than it is for a blockbuster. 2) there are some issues, such as the fact that you need to alert the FDA a year in advance of the day you want to file in order to the voucher, which limit the desirability of the voucher. The pediatric priority review voucher that Biomarin received has less restrictions and will be more valuable. Full disclosure: I am long a small position. Hoping to get a more material position if this converges to the cash value. I think there is too much optimism surrounding the voucher, so there's a good chance the sales price disappoints. 1 He's admitted to short term memory problems and feeling tired. He's specifically stated there is no diminution of intellectual abilities. 2 I hope you're not suggesting I think there is a current realtime P/BV arbitrage between a full blown operating company and one just starting out? The concept is quite sound to compare what the P/TBV is now when it is mostly a pile of cash to what it will be when the company is more fully up and running in a couple of years. At that time the company should sell at a multiple of P/TBV. And why wouldn't Goodman be successful in resuming where he left off with paladin? I note you are using the same metric i am, P/BV to justify reasonable price paid, just different levels for what we consider a reasonable risk/reward. Sounds like you have more knowledge of the industry than I and are able to make a determination of the value of the voucher from that. That said $10-30mm seems way to low for the value of saving five months time on the review? The value is based on the highest and best use of the voucher, the top two contenders, not the value to the average drug in phase 3 and I'm betting there are two players that will pay significantly over $30mm and Goodman seems to be betting his credibility on it being a lot higher also. Link to comment Share on other sites More sharing options...
EliG Posted May 1, 2014 Share Posted May 1, 2014 Head injuries have uncertain outcomes. Some patients remain stable. Some continue to improve. Some deteriorate. See the studies referenced in this review: Patients after a head injury face an uncertain long‐term future http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2077536/ I agree with Liberty, this is a delicate subject. My best wishes to CEO. Link to comment Share on other sites More sharing options...
Drokos Posted May 5, 2014 Share Posted May 5, 2014 He has admitted that he is not, and will never again be, 100%. You can not compare the P/BV ratio of a pile of cash (what GUD currently is) to the P/BV of an operating pharmaceutical company (Paladin). Well you can, but it's foolish and doesn't actually provide any value. I'd take the under on the value of the voucher. For 1) these days almost all blockbuster potential drugs are treating some sort of rare disease/oncology so they will get some sort accelerated approval/breakthrough status so the voucher will be of no use to them. That means it will likely have to be used on a me-too drug with peak sales in the hundreds of millions, which means the value of a faster approval is significantly lower than it is for a blockbuster. 2) there are some issues, such as the fact that you need to alert the FDA a year in advance of the day you want to file in order to the voucher, which limit the desirability of the voucher. The pediatric priority review voucher that Biomarin received has less restrictions and will be more valuable. Full disclosure: I am long a small position. Hoping to get a more material position if this converges to the cash value. I think there is too much optimism surrounding the voucher, so there's a good chance the sales price disappoints. 1 He's admitted to short term memory problems and feeling tired. He's specifically stated there is no diminution of intellectual abilities. 2 I hope you're not suggesting I think there is a current realtime P/BV arbitrage between a full blown operating company and one just starting out? The concept is quite sound to compare what the P/TBV is now when it is mostly a pile of cash to what it will be when the company is more fully up and running in a couple of years. At that time the company should sell at a multiple of P/TBV. And why wouldn't Goodman be successful in resuming where he left off with paladin? I note you are using the same metric i am, P/BV to justify reasonable price paid, just different levels for what we consider a reasonable risk/reward. Sounds like you have more knowledge of the industry than I and are able to make a determination of the value of the voucher from that. That said $10-30mm seems way to low for the value of saving five months time on the review? The value is based on the highest and best use of the voucher, the top two contenders, not the value to the average drug in phase 3 and I'm betting there are two players that will pay significantly over $30mm and Goodman seems to be betting his credibility on it being a lot higher also. Correct, I use the P/BV ratio to justify a fair price now while it is still a pile of cash. My point was that P/BV is essentially a worthless metric for pharmaceutical companies. If one company develops a drug through internal R&D that is expensed, it is going to have very little on the balance sheet and will be at a high P/BV versus a company that acquired the drug externally which will have the big asset on the balance sheet. Even if they both spent the same amount of money to develop/acquire the drug and the drugs will produce the same exact cash flow, the P/BV's will not be comparable. Link to comment Share on other sites More sharing options...
Drokos Posted July 31, 2014 Share Posted July 31, 2014 Seems Knight voucher will fetch a price much lower than the $100 million some were hoping for. Biomarin just sold its voucher for $67.5 million. As a reminder, Knight's voucher is significantly less valuable (any user would need to notify the FDA 1 year in advance of using it) so I would expect it to sell for significantly less than this price. I am also not completely confident in Knight management's ability to monetize it. They seemed to be dragging their feet, saying 'they have no idea what route they'll go to sell it' and 'they expect it to take a long time'. I would have assumed they would have already been in contact with interested parties before the approval and could have quickly engaged a banker to organize the sale. http://blog.sfgate.com/techchron/2014/07/30/biomarin-sells-special-fda-voucher-for-67-5-million/ Link to comment Share on other sites More sharing options...
snowball82 Posted July 31, 2014 Share Posted July 31, 2014 You shouldn't under estimate J. Goodman capacity to build another Paladin. Snowball82 30-7-2014 Link to comment Share on other sites More sharing options...
Drokos Posted July 31, 2014 Share Posted July 31, 2014 My post simply said they are likely to sell their voucher for less than $100m and I provided the recent comp as support. It said nothing about doubting Mr. Goodman. I have actually said in the thread that I believe in him, despite the health issues and risks, but that I thought the stock price was too high given that the expectations for the voucher are too high. We'll see how it trades tomorrow. I do think he can compound capital at a very attractive rate, so I would be pleased to buy a big position if this trades for anything near book value(assuming a voucher sale of somewhere around $40m). Link to comment Share on other sites More sharing options...
treehugger Posted August 1, 2014 Share Posted August 1, 2014 My post simply said they are likely to sell their voucher for less than $100m and I provided the recent comp as support. It said nothing about doubting Mr. Goodman. I have actually said in the thread that I believe in him, despite the health issues and risks, but that I thought the stock price was too high given that the expectations for the voucher are too high. We'll see how it trades tomorrow. I do think he can compound capital at a very attractive rate, so I would be pleased to buy a big position if this trades for anything near book value(assuming a voucher sale of somewhere around $40m). Hmm.. shouldn't the voucher be now worth MORE than the amount sold by Biomarin (67.5 million rather than the 40 million)? I'm thinking more due to scarcity value. After all, if you wanted the voucher you only have one guy to talk to now.. Only 4 in existence - Novartis -used, Janssen - use for itself?, Biomarin - sold, Knight - status unknown.. Link to comment Share on other sites More sharing options...
snowball82 Posted August 1, 2014 Share Posted August 1, 2014 Hmm.. shouldn't the voucher be now worth MORE than the amount sold by Biomarin (67.5 million rather than the 40 million)? I'm thinking more due to scarcity value. After all, if you wanted the voucher you only have one guy to talk to now.. Only 4 in existence - Novartis -used, Janssen - use for itself?, Biomarin - sold, Knight - status unknown.. And the guy can negociate a deal, we know that ! This voucher has probably a tremendous value for Big pharma. Link to comment Share on other sites More sharing options...
treehugger Posted August 12, 2014 Share Posted August 12, 2014 http://www.marketwatch.com/story/knight-therapeutics-inc-hires-advisor-to-sell-its-priority-review-voucher-2014-08-12 Link to comment Share on other sites More sharing options...
snowball82 Posted August 13, 2014 Share Posted August 13, 2014 Probably a strategic step to monetize. Link to comment Share on other sites More sharing options...
snowball82 Posted August 14, 2014 Share Posted August 14, 2014 Competition can begin. Knight to auction FDA priority-review voucher. What is the value of this voucher for a big pharma company ? http://www.theglobeandmail.com/report-on-business/knight-to-auction-fda-priority-review-voucher/article20022459/ Link to comment Share on other sites More sharing options...
treehugger Posted August 14, 2014 Share Posted August 14, 2014 Competition can begin. Knight to auction FDA priority-review voucher. What is the value of this voucher for a big pharma company ? It probably makes more sense to trade it Big Pharma for cash and under promoted licensing rather than just straight cash. Link to comment Share on other sites More sharing options...
snowball82 Posted August 14, 2014 Share Posted August 14, 2014 They will take the best offer ! Maybe more on the confrence call at 8:30 Link to comment Share on other sites More sharing options...
LesPaul Posted August 14, 2014 Share Posted August 14, 2014 Initiated a small position today. Don't know whether they'll get 60m or 100+m for the waiver but I'm more interested to see what they do with that cash afterwards. Link to comment Share on other sites More sharing options...
gary17 Posted November 19, 2014 Share Posted November 19, 2014 The voucher sold for $125M USD http://www.marketwired.com/press-release/knight-sells-priority-review-voucher-to-gilead-tsx-gud-1969777.htm Link to comment Share on other sites More sharing options...
Hawks Posted November 19, 2014 Share Posted November 19, 2014 Looks like the next acquisition is just around the corner. Link to comment Share on other sites More sharing options...
giofranchi Posted April 9, 2015 Share Posted April 9, 2015 From the March 2015 Presentation: $417 million in cash and equivalents and marketable securities. + Impavido: $500k expected revenue, at a multiple of 5x it would be worth $2.5 million. + PHOTOFRIN: Upfront payments include $32.7 million cash consideration and $5M of CHI’s common shares. Total: $37.7 million. + ATryn: I don’t know how to put a value on this one, therefore let’s say it is a zero. + NeurAxon: $1.75 million. + CRH Medical: USD $30 million (a loan that bears interest at 10%). + Apicore: USD $6.5 million (a loan that bears interest at 12%). + Synergy Strips: USD $6 million (a loan that bears interest at 15%). + Origin Biomed Inc.: $0.85 million (a loan that bears interest at 15%). TOTAL ASSETS: $502.3 million. Debt is zero, I think… At least it was not even mentioned in the presentation. MARKET CAP: $772 million. If my valuation is right, GUD today is selling for 1.54 x NAV. With lots of dry powder to use should the right opportunity come their way. And a proven management. Am I missing something? Thank you, Gio Knight_Corporate_Presentation_Mar_2015.pdf Link to comment Share on other sites More sharing options...
EliG Posted April 9, 2015 Share Posted April 9, 2015 And a proven management. CEO suffered a brain injury in an accident. He seems to be doing fine now, but the long-term effects of the head trauma are unknown and unpredictable. There is a risk he may suffer a setback. Can GUD management replicate Paladin success without Goodman, if Goodman has to step aside for health reasons? Link to comment Share on other sites More sharing options...
giofranchi Posted April 9, 2015 Share Posted April 9, 2015 Can GUD management replicate Paladin success without Goodman, if Goodman has to step aside for health reasons? Probably not! But, as always, I will take the evidence as it comes… Provided we have not paid too much for a great business, that policy usually leads to good and safe results: if and when Mr. Goodman would be forced to step aside for health issues, GUD simply won’t be the business I am interested in right now anymore. Gio Link to comment Share on other sites More sharing options...
gary17 Posted April 9, 2015 Share Posted April 9, 2015 Can GUD management replicate Paladin success without Goodman, if Goodman has to step aside for health reasons? Probably not! But, as always, I will take the evidence as it comes… Provided we have not paid too much for a business, that policy usually leads to good and safe results: if and when Mr. Goodman would be forced to step aside for health issues, GUD simply won’t be the business I am interested in right now anymore. Gio I don't think it is reasonable to expect Mr. Goodman to be the same as before - however, going by what has happened last year and his personal stake in GUD; I find it a risk worth taking. Gary Link to comment Share on other sites More sharing options...
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