RE: Reverse splitDH - I have remained silent for a long time now as I have had better things to do than jost with others on this board. But it is painfully obvious that most cannot read between the lines. It also helps to simply due a little due diligence.
The arrival of a very senior GSK pipeline expert Dr.Huber and the long silence from the company suggested that something was up - and not just comsuming resourses for 'fat paychecks' or 'overhead'. Some think that these licencing agreements were a worn out life jacket thrown to a dying junior bioteck company .There is so much to say that one does not know where to start.
Funny how some people thought it would be 2010 before ADH-1 got a sniff of a licencing agreement - but there it is - of course the lawyers are going to use the words 'if' but I will address that later on with my own interpretation of what I read and what Peters has said publically. Its still a great deal and with the licencing of Eniluracil its huge.
Some people think that this drug was a complete waste - failed twice - why would we take it on. Its obvious that AHX figured out why it failed - has filed the patent on the procedure - and will make this drug not only work but it will be able to take the whole 5-fu AND ENILURICAL proprietary making the cash flow on this drug much higher than the previously published ESTIMATES of a 1 billion $'s a year - and we all know how conservative AHX is with their estimates and releases.
GSK is one of the top 2-3 pharmacutical companys in the world which gives inmense credibility to AHX and the licencing agreements.
Here's a question: Why would a company of this size TURN DOWN several offers - some of which were willing to pay them 8 figures for the right to redo this drug and instead GIVE it to AHX and put 3mill into the deal?
Doesn't sound like something a company this size would do with a drug that was doomed. Or perhaps as Peters has said that they have seen clinical data that shows them otherwise. To not assume this would suggest that GSK is filled with idiots then - as opposed to AHX which needs 2-maybe 3 signatures to sign off on any deal - GSK on the other hand for licencing agreements totalling $220 million plus double digit royalties on both - of which are both billion $ plus a year drugs you would think that this would need the signatures of up to 20 or more wise men AS IT MOVED UP THE FOOD CHAIN at GSK- because that is how companies of this size do business.
We have been told that GSK has infused this $3m to get the drug to phase 3 fullblown trials. Read between the lines kids - what is the money being spent on in between. I would think that there would be a short clinical trial before not to soon to prove out to GSK exactly what has been represented to them and then the huge phase 3 trial which I would imagine at that point GSK will exercise its option to 'claw back' eniluracil for its own development being that its $1billion plus likely maybe double that now that combined with 5-FU it will be proprietory - at that point when it becomes comercialized. Don't forget this negotiating has been going on now for 16-18 months therefore one would assume that they have been moving full bore on a clinical trial design to - as mentioned previously to start relatively soon - as I don't see GSK messing around with the potential of billions of $'s of revenue just waiting to start rolling in the door sooner than later.
Now its time for interpretation:
Lets review and make comment as we walk through this - the very conservative Dr. Peters has said publically in interviews ,and in print that they now have 2 - billion $ drugs in the pipeline.
Most royalties deals are in the 12%-15% range - and assuming the Eniluracil will throw off 1.5 b as it will be proprietary and Peters estimate of 1 b will be very conservative - this represents $225m a year in royalies for a 15 - 20 year span. With todays announcement of the 1 for 5 reverse split - which was obviously influenced by very large US institutions telling them that this looks like a great entry point but not at .35 - we now have 42million shares. Lets see $225 m divided by 42 m shares is $5.37 /share net profit for 15-20 years. What would be the valuation of the share price then - not including ADH-1 - and for those of you still harping on what is now a non event but still no doubt a phasa 3 drug STS which Peters has also said publically will be in trials this year. Because 5 FU is being combined with eniluracil the 1.3 b of current annual rev will jump as this no longer be a generic drug anymore either.
GSK gave AHX the drug and 3 million as opposed to taking 8 figures from other suitors - I guess this pharmacutical company really believes that the problem is solved .
Peters had 6 sell side ANALYST meetings yesterday in NY - 6 more than they have had in the last year - and 3 in Toronto the day before! Maybe IR has been fixed - maybe with GSK involved people now want to hear the story!
I have digressed a little - the 3m infusion into AHX not only gets them to exactly where GSK wants them to be ,but it will a monstrous return on investment - not just for the exercising of warrants for cost recovery.
To me its obvious: GSK will claw back the option on eniluracil - the milestones will NEVER be paid to AHX neither will any royalties.Why would they - it would be immensely cheaper to buy them out as opposed to pay these sort of numbers.
The question is at what price and when do they do this. The rollback is being set in place to bring in the big US hitters and flush the unhappy little canadian retails shareholders who are simply tired of the story. With only 42m shares of which maybe only 10-12 m are the float it wouldn't take much for the share price to soar if an institution wanted only a million share position. They will all use the calculator the same way I did to come up to the $5 /share rev from eniliracil alone. GSK as I have said will not want pay out those numbers that I have said - nor approx the same value of numbers down the line for ADH-1 when it eventually goes commercial.Neither will they let the share price balloon with institutions putting their own evaluation on the company and the blue sky ahead. I would guess that it will happen after the proving up clinicals but before the phase 3's . In my book that would put it in the $3.50 - $5.00 range Cdn pre rollback -- and I am figuring these numbers based on where I believe the stock will go based on US analyst coverage and yes piggy-backing on the GSK name. GSK is somewhat known on Wall street and Wallstreet will listen - the second GSK comes back and says we are pretty sure we solved the eniluracil -5 FU problem and we are back on tract - much the the way Imclone came back with their drug Aviston - and by the way it will be proprietary now ( cha-ching) oh - and did we tell you we think we also have one of the the number 1 VTA drugs in the pipeline and you should see its intellectual property rights.
Color me stupid but I see don't a bit of beef BUT rather the whole goddamn herd.