A little decision analysis
Let us try a little analysis to think through the expected value of some representative potential scenarios involving ONCY getting a buyout deal over the next year.
We can use probabilities, which can be seen as degrees of belief, not measurable facts in the world, and which is the only conception of probability that works for events without large data and experience.
To begin, what is the p that the company is not actually in negotiations, but rather just in a funk with nothing to say. To avoid over-confidence, we can say it is .1 or a 10 percent chance, even though I strongly believe they are negotiating. The payoff for that scenario is simply some number around current market cap but with more shares issued to cover costs for a year.
Next, what is the p that the company is in negotiations, but cannot extract an acceptable offer from big pharma this year. Let us say the minimum offer the company would accept would be $ 2 bil US. We can again conservatively say that probability is .2 or 20 percent. The payoff is again somewhere around the current market cap, but with but with more shares issued to cover costs for a year.
Next what is the p there is an acceptable offer this year of between $2 bil and $4 bil. We can put that at .3 and call the expected payoff to be $3 bil as the mid point in the range, paid out in 2023.
Next what is the p there is an acceptable offer this year of between $4 bil and $6 bil. We can put that at .2 and call the expected payoff to be $5 bil as the mid point in the range, paid out in 2023.
Next what is the p there is an acceptable offer this year of between $6 bil and $8 bil. We can put that at .2 and call the expected payoff to be $ 7 bil as the mid point in the range, paid out in 2023.
The expected value of the payoffs that involve a buyout is:
.3 x 3 b + .2 x 5 b + .2 x 7 b
= .9 + 1. + 1.4
= $ 3.3 bil expected value, even accounting for 30 percent chance there is no deal. One could include some negative payoffs for the scenarios in which there is no deal if you care to do so.
You can put in your own probabilities and your own payoffs to evaluate the expected value, given your own assumptions.
You could also introduce your own scenarios regarding a partnership that is not a complete buyout and your guesses on its expected value.
In sum, we face considerable uncertainty, but most scenarios look good, and the expected value is very encouraging. I am tempted to buy more but I am at the upper limit.