Vanda's Fanapt Deal Just Okay: BioBuzz
Novartis (NVS) is the logical choice to sell Fanapt in the U.S., probably the only choice, since the Swiss drug maker used to own the Fanapt, licensed the drug to Vanda in 2004 but still controls significant financial rights.
An outright sale of Vanda to Novartis was the deal Vanda bulls dreamed about, which is why the stock traded as high as $16 a share this year.
But Monday's licensing deal is more problematic. The $200 million in cash Vanda receives from Novartis supports a base valuation of about $7 a share, but upside from there is now almost totally dependent on Fanapt sales.Vanda won't disclose its sales royalty but hinted that it was in the mid-teens range. If you assume 15% and peak Fanapt sales ranging from $200 million to $400 million, Fanapt is worth between $4 a share and $8 a share to Vanda. Add that to the cash from this licensing deal and Vanda's stock is worth $11-$15 a share. Vanda shares were up 10% to $12.65 in recent Tuesday trading. Let's give Vanda credit for its accomplishments. The company got Fanapt approved, a feat no one thought possible. And the company made the best deal possible for the drug's commercialization. Fanapt is launching into a very tough competitive environment for schizophrenia drugs, including lower-cost generics, but if the drug does very well, Vanda stands to gain more from an additional $265 million in milestone payments from Novartis.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV