Seeking Alpha

Penn Bioinvestor's  Instablog

I have extensive knowledge on drug discovery, also I am interested in fundamental analysis of biotech/pharma stocks. See Seeking Alpha's policy on anonymous authors: http://seekingalpha.com/article/69847-seeking-alpha-policy-on-anonymous-authorship
  • VNDA is undervalued now 0 comments
    Nov 11, 2009 06:52 PM | about stocks: VNDA, TTNP.PK
    VNDA  currently share price is heavily manipulated by shorters, much under-performed comparing to TTNP. But it is the time to buy cheap shares now.

    Target: 20 and above, good chance of buy out above $25(depending on sell number of Fanapt).

    Valuation calculation:(in a conservative way)

    1) 200M Cash from Novartis

    2) Another ~200M Cash from ROW partnership as predicted by morningstar
    once ROW approvals are in order

    3) 265M Cash eligible from Novartis achieving sales milestones in USA
    and Canada - lets discount this cash to 50M since VNDA obviously
    doesn't have it yet.

    4) Another 50M of discounted value due to a similar sales milestone
    arrangement (again, referring to the morningstar piece) with a ROW
    partner.

    5) A "just-off-the-top-of-my-head" discount of ALL the future
    royalties (both USA/Canada and ROW) to the current amount of 50M. (should be much more than that: Consider TTNP receive 8-10% of US sell and now valued at $100 Million, VNDA will receive worldwide in double digits)

    6) Basically no debt, according to Yahoo and some $27 million cash.

    So, that gives us:
    200M + 200M + 50M + 50M + 50M = 550M
    -----> 550M / 27M shares outstanding = ~$20 per share.


    Morningstar analyst report:
    Vanda Partners Fanapt with Novartis
    by Lauren Migliore | 13 Oct 09 |

    After months of anticipation, Vanda Pharmaceuticals' VNDA plan to commercialize its antipsychotic drug Fanapt has finally come to light. Vanda will award Novartis NVS exclusive commercialization rights to Fanapt in the United States and Canada in return for an up-front payment of $200 million, double-digit royalties on sales, and up to $265 million in development and commercialization milestones. The terms of the deal are very similar to our predictions for the schizophrenia drug's future and thus have a net neutral impact on our valuation of the company.

    Additionally, Novartis will be responsible for future clinical development of Fanapt, including the development of a long-acting injectable formulation. This aspect of the deal is especially important, in our opinion, as it unburdens Vanda of any future financial obligations, thereby freeing up funds for other pipeline candidates while still allowing the firm to utilize any data generated toward Fanapt's approval abroad. Novartis was the obvious choice for a commercialization partner, as the pharma firm outlicensed Fanapt to Vanda in 2004 and still owns significant financial rights to the drug. We expect Vanda to strike a similar deal with the Swiss drugmaker for commercialization rights outside North America following Fanapt's marketing approval abroad.

    Although the terms of the deal were not eye-popping, we think this is a favorable arrangement for Vanda shareholders. Vanda is much better positioned with Novartis in its corner--as opposed to trying to commercialize the drug alone--and should generate meaningful revenue from Fanapt royalties going forward. After a roller-coaster ride during the last 12 months, including a nonapprovable letter from the Food and Drug Administration followed by the surprise approval of Fanapt in May, Vanda's partnership with Novartis marks the climax of Fanapt's long journey to market. This deal dissolves a great deal of the ambiguity surrounding Fanapt's commercialization, and we plan to lower our fair value uncertainty rating. 

    VNDA is still rated 4 out of 5 stars, and Fair Value Estimate $20.00
    Themes: Biotechnology Stocks: VNDA, TTNP.PK
Back To Penn Bioinvestor's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Full index of posts »
Latest Followers

StockTalks

  • Watch THRX. The FDA to decide on 11/26/09 for Vibativ HAP. Most likely a delay of approval, but opportunity to accumulate on dip.
    Nov 26, 2009
  • Buy XNPT around $16.
    Nov 11, 2009
  • ARNA: Rodman/Renshaw Cuts to Underperform from Market Perform; Target Price: $3.00
    Sep 18, 2009
More »
Posts by Ticker
ABIO, ARNA, ASTM, AVNR, BDSI, BFRM, BMY, DNDN, GERN, HGSI, LLY, MEDX, MRK, NVS, OPXA, OREX, PFE, SNY, SOMX, STEM, THRX, TSPT, TTNP.PK, VNDA, VVUS, XNPT

Latest Comments


Most Commented
  1. Vivus(VVUS) is in the driver's seat for obesity experiental drug (2 Comments)
  2. How to correctly understand the value of VVUS (2 Comments)
  3. Is VVUS secondary offering similar story to HGSI, DNDN? (2 Comments)
  4. Biotech stocks are heavily manipulated now (1 Comment)
  5. Expect VNDA buyout soon (1 Comment)
Posts by Themes
Biotechnology, biotechnology
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.