TSX:DHT.UN - Post by User
Post by
retiredcfon May 10, 2023 12:29pm
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Post# 35440973
RBC
RBCSurprised we're in the red. GLTA
SOBI to acquire CTI BioPharma - reflects positively on DRI's ability to identify good royalties
TSX: DHT-U | CAD 9.09 | Outperform | Price Target CAD 17.00
Sentiment: Positive
Our view: We view the announced acquisition of CTI BioPharma by SOBI as slightly positive for DRI shares. We highlight that this is the second acquisition of a company in which DRI purchased a royalty asset and follows Sanofi's acquisition of Provention Bio announced in March (here). In our view, CTI's acquisition reflects positively on DRI management's ability to source valuable assets. SOBI is acquiring CTI BioPharma for $9.10 per share (+89% premium to last close). While Sanofi's acquisition of Provention Bio ultimately led to the Tzield royalty sale for $210MM to Sanofi vs. $100MM upfront investment by DRI (here), we do not expect a royalty sale of VONJO. The royalty associated with VONJO (pacritinib) is capped at $400MM of US sales vs. Tzield royalty that had no cap on worldwide sales. Additionally, in our view, the timing of the Tzield royalty acquisition and the sale of Provention Bio to Sanofi occurred in a short time frame facilitating a royalty sale. We note that a royalty sale by DRI is an unusual transaction and has happened only twice in the last 21 years.
SOBI to acquire CTI BioPharma. This morning (5/10), Swedish Orphan Biovitrum AB (SOBI)announced the acquisition of CTI BioPharma in an all-cash transaction for $9.10 per share (+89% premium to last close of $4.82), for an EV of ~$1.7B (see additional details here). The acquisition is expected to closed in Q3/23.
Background on VONJO royalty transaction. The acquisition of VONJO royalty asset was DRI's first royalty transaction as a public company. DRI provided a $50MM senior secured loan to CTI at closing of the transaction in August 2021, which was prior to the FDA approval of VONJO. The loan bears interest at LIBOR + 8.25% (with a LIBOR floor of 1.75%) and has a five-year term, with the principal due at maturity. In February 2022, DRI invested an additional $60MM following the FDA approval of VONJO (pacritinib). More recently, in January 2023, DRI paid $6.5MM to CTI as a milestone payment. DRI receives royalties of 9.6% on the first $125MM of annual US VONJO sales, 4.5% between $125-175MM, 0.5% between $175-400MM and has no entitlement above $400MM of annual US net sales.