Sirona Biochem Corp V.SBM

total ballpark deal value

[biorun]

I am not a Chartered Financial Analyst but can say a few things from my capital budgeting experience that might spark some clarity discussions around potential deal value here:

- a lot of emphasis from company on the strength of the royalty stream. I used 5% below but it could be higher or lower. 

- The company says that the deal will make them profitable. If they are spending a little bit more than shoestring amounts to buy equipment and staff as they have said, which they have not been spending in the past, the ballpark below is in line with that statement. One could also look backwards and add 10% profit to the historical expense line and go there as well.

- Pre-acquisition $158M USD in sales in 2018 confirmed growth at 13.8% puts sales of Skinmedica extrapolated to approximately at $300 USD or $390M Cdn for 2023, when it's reasonable to assume the ingredients will be on shelves. 

- If 25% of product contains the ingredient, then that nets out to $98M in sales in scope. I have no idea if 25% is the right proportion but will look at that later.

- Taking a very reasonable 5% royalty translates to $4.9M in royalties revenue x 17 years = $83M. Note the 17 years was noted clearly in bold font on the presentation and assume this is the term.

- Add growth in sales per year at 5% from 2023 onwards (I didn't add that in yet) - gives you an idea that in year 17, royalties eventually climb to 2.30x higher from the compounded growth at this lower rate (or approximately $11M), then add upfront and milestones for whatever kpi's are in place which are plus plus..

Lots of assumptions here, but if royalties are higher than 5%, then even better. Lots of potential to run sensitivity analysis, refine the model, and maybe a little monte carlo work to assess risk outcomes.

In summary, the deal is subject to a variety of factors, but arguably a royalty rate on product pricing is a completely different scenario than just getting 8k per kg of raw chemical.

So $83M plus all those extras not factored into the analysis could potentially materialize beyond $100M.

What is the market cap today? I think this number looks more reasonable, realistic and in line with the profit ascertion of the company than the PRC number.

Do your own due diligence but its looking a tad more healthy than 16 cents per share.

[Engcan77]

Biorun. I know where you are coming from. The potential looks amazing. Not just this deal, but all that is in the pipeline. However, an upfront payment is guaranteed. The royalty payments are safer for Abbvie.  For Sirona, the royalty payments could turn out to be a huge. Now we wait again for a product, or products to be put into the market, and hope sales are successful. Somewhat of a

[sakinny3]

but again, we need a figure to start properly analysing. It was mentioned in the past I believe that an average upfront payment as per Linda's company was 50 million? In which case smaller in relation to that figure can still be sizeable for Sirona. As always its difficult to know the thoughts in the head of the writer. We see tonight / tomorrow I guess

[biorun]

Good response and can certainly appreciate that perspective.. I guess some people are looking for a take your money and run scenario and are unwilling to wait for the sales to accrue. This is like a forced pension plan to keep the company and science development going for the next two decades.  This other way to look at it is that its like buying a revenue ticket on the 17 yr Abbvie train

[Engcan77]

Biorun. You are throwing a lot of numbers out there without knowing what was on the table. Was the upfront payment either 1 million with more royalties or 2 million with a smaller or larger royalty revenue. Or are we talking between 1 million to 50 million difference for upfront. Only they know.  Also will the royalty payments start coming in next month, next year or longer. All i know is

[biorun]

Engcan77 - sorry, I was only looking at the middle and back end of the deal. Whether the upfront is 1 million, 2 million, or even 5 million, that really doesn't do anything to move the share price or affect the overall deal value. Its really the total value of the agreement over the term which evidently looked at Abbvie's own forecasts as the key reference point.  If they shared

[SironaInvestor]

Biorun, unbelievable how you still support the management. Nobody knows the true value of this deal independent of a high or low upfront. Remember, Sirona started to promote the compound as an alternative to lighten the skin in a 25 billion market. Now, we are in a 8 billion hyperpigmentation market and sold it with exclusive rights. So a new Goldstandard should reflect high commercial value but

[biorun]

I absolutely do not support them. To be crystal clear. But I do really support those actors who bring value and solutions (Geraldine, Linda and Bieber) But there is a difference between the company itself as a corporate legal entity, their contracts for revenue, their intellectual property AND those who currently lead it. This is a solveable problem. Quite simply, based upon the market

[Engcan77]

Biorun. I agree. With Linda's negotiating experience, she got the best deal possible. She relayed the deals on the table to management. She threw in her 2 cents, and then management decided which way to go. Again, Howard has slapped himself in the face by not being upfront with investors from the start. By saying 'look at the smile on my face'. and saying the Abbvie deal has set the

[Pandora]

If the company is guaranteed 17 years of "Royalty" payments how would it be if they guaranteed shareholders 17 years of a dividend payment -- say at 5% or so? Would that also provide a boost to the shareprice? I thought they might at least regurgitate the news release at the open this morning but they couldn't even be bothered to do that. You can measure just how much they are

[navajojoe]

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[biorun]

Be respectful.

[Pandora]

So it might get us to 18 cents - at least for a while? Is the timing a good thing? ie, 8:30 at night.