@VIC: Noven Pharmaceuticals - Long Idea

Fund manager Amit Chokshki attended the recent 3rd Annual New York Value Investing Congress on behalf of Seeking Alpha. Here are Amit's notes from the presentation of Atticus Lowe and Lance Helfert of West Coast Asset Management [WCAM]:

10 Signs of a Strong Company

  • Understandable, focused, simple business model
  • Wide Moat
  • Recurring revenue
  • Low inventory risk
  • Alignment of interests
  • Healthy culture
  • Flat organizational structure
  • Low reinvention risk
  • Low capital requirements
  • Favorable demographics
  • Noven Pharma (NOVN-OLD) – long idea. Company focuses on drug delivery with best in class “Dot-Matrix” patch technology
  • WCAM owns 14% and has owned it in the past
  • EV = $270MM which could be undervalued
    • Estrogen therapy offers value
    • NOVN maintains a 49% interest in a JV with Novartis that, due to ownership level, is accounted for with the equity method so it is generally a balance sheet item as opposed to a contributor of earnings power
      • WCAM believes this JV alone could be worth $500MM+
      • JV could result in a buyout of NOVN by Novartis
    • NOVN has a deep patch pipeline along with new releases such as Daytrana, an ADHD patch, which could provide more upside value
  • WCAM believes NOVN is worth $21-$31 per share against current share price of $15