Isoray: A Perfect Acquisition For Johnson & Johnson Or Pfizer

| About: IsoRay, Inc. (ISR)
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My first medical device company was sold to Johnson & Johnson (NYSE:JNJ), and I'm currently consulting for another company, Isoray Incorporated (ISR) that I believe is a perfect takeover candidate. Now, I do not generally pursue dealmaking, however, when the opportunity presents itself, I step up to the plate. My impression of ISR is that any of the big Pharma companies could benefit from its products, including Johnson & Johnson, Merck (MRK), or Pfizer (PFE).

I vote for Johnson & Johnson because the company has been on an acquisition binge over the last couple of years. Management has picked up 11 new companies, and is continuing on this path. The company is sitting on $30 billion in cash, some of which would be better used buying a company like Isoray.

Now, as for Isoray. It owns the patents to a line of products that represent the closest thing to a cure for prostate cancer that I've ever seen. In a recently concluded five-year study, the company achieved a 98 to 100% cure rate. Isoray is successfully addressing an unmet need for a market that is expected to reach $4.8 billion by 2015.

Since I'm working for Isoray as a consultant, I admit I am biased. But the more I learn about this company, the more I see that its products may become the next standard of care for many types of cancer. (I recommend reading my recent Seeking Alpha article in order to get a complete understanding of Isoray's potential and substantial undervaluation.)

Isoray's product lineup would be a perfect complement to Johnson & Johnson's existing portfolio, especially considering the success of Johnson & Johnson's new prostate cancer drug, Abiraterone. Johnson & Johnson already has an effective marketing and distribution system in place, and it could begin marketing Isoray's products quickly and at a relatively low cost.

I also believe Pfizer would be an excellent partner for Isoray given its huge size and desire to bolster its cancer portfolio. The FDA recently approved Pfizer's new lung cancer drug, Xalkor, which now gives it a total of 20 cancer drugs. Isoray's products would provide a perfect complement to Pfizer's existing pipeline, particularly in the lung cancer and prostate cancer arena.

Pfizer has $29 billion in cash, and understands that acquisition is often cheaper than development. The company just completed its $56 million acquisition of the biopharmaceutical company, Icagen by merging its wholly owned subsidiary, Eclipse Corporation, with and into Icagen. I expect Pfizer to continue on its acquisition path, and believe Isoray to be an ideal target.

Given my history with Johnson & Johnson, I will be contacting the company's M&A department with the intention of introducing Johnson & Johnson to Isoray's phenomenal success in treating prostate cancer. I may also contact Pfizer, and Merck. In any kind of a buyout situation, I would expect a premium of at least 100% over today's $.86 share price. Isoray shares are extremely undervalued, making the company even more attractive to a large parent company. I don't know if Isoray would accept any offer under $2 per share, but shareholders would certainly benefit if any reasonable offer was made.

Also, investors need to be aware of an extremely important near-term catalyst that could significantly increase Isoray's valuation; the company is awaiting approval from Washington state to begin selling its GliaSite catheters. That approval could come any day now, and when it does, Isoray will have clearance to immediately begin selling GliaSite products in the United States. Isoray expects to book GliaSite revenue this year, so I believe the approval is imminent. The GliaSite catheters alone could add 50% to Isoray's annual revenue.

With all Isoray's recent successes, and Johnson & Johnson's and Pfizer's proven marketing machinery, I say this is a match made in investment Heaven!

Disclosure: I am long ISR.

Additional Disclosure: John Ford is a general business consultant for Isoray Incorporated and a shareholder. For disclaimer and SEC rule 17 b disclosure information, please click here.