Analysts: QLT Assets Should Fetch a Healthy Premium

QLT Inc.’s (QLTI) bid to sell its assets will likely fetch about C$7 a share, a significant premium over its current value, analysts said following the B.C. biotech company’s official announcement that its board has authorized “exploration of strategic alternatives.”

That announcement temporarily lifted shares to just under C$5, a 25% gain, but Raymond James analyst Brian Bapty quickly upgraded his QLT recommendation to “outperform” from “market perform” on the expectation that its eventual sale price will be even higher.

Although a sale will not likely happen until after the March, 2008 deadline for a U.S. regulatory response on QLT’s acne drug Aczone, a bid may come in before then, Mr. Bapty said.

In a research note he said that,

Likely buyers for QLT include mid to large biotech companies, specialty pharma companies and, if the company is sold in parts, financial players or any combination thereof. We do not believe a large multinational pharmaceutical company would be a buyer.

Still, the price it fetches could vary significantly depending on whether it auctions itself as a whole or in parts, said RBC Dominion Securities analyst Douglas Miehm. As a going concern, it could be worth C$6.06 per share, but in pieces, it could be worth up to C$8.12, he said in a research note.

Mr. Miehm left his share target unchanged at C$6, and his recommendation unchanged at “sector perform, above average risk.”

He wrote that,

We believe this process will likely take some time to complete to maximize value. Combined with the lack of operational catalysts in the near-term, we believe the stock may remain range bound at current levels over the next several months.