Afexa Life Sciences may not like the $50-million hostile bid it's gotten from Paladin Labs, but the price is in line with comparable deals, says TD Securities analyst Lennox Gibbs.
Afexa is best known as the maker of COLD-FX. The target spurned the offer, which came after talks between the companies broke down, saying it "significantly undervalues" Afexa.
But Mr. Gibbs argues that it's about in line with recent deals in Canadian pharma. And if Paladin can get it done, there is a bonus in addition to the popular COLD-FX product: a salesforce that Paladin can use.
The bid is 1.3 times Afexa's annual sales.
Mr. Gibbs says that there's usually a "rule of thumb" of 2.5 times to 5 times revenue for such acquisitions. Based on Afexa's revenue last year of $39.6-million, that's something in the neighborhood of $100-million to $200-million.
Except that he argues it doesn't apply in this case "because Afexa is a mature, one-product over-the-counter company selling into the Canadian market."
Instead, Mr. Gibbs points to three deals done by Valeant Pharmaceuticals of late that are close to an average multiple of two times revenue. That's closer to $80-million.
Those of you who are mathematically inclined, especially Afexa shareholders who are feeling burned, will point out that that is still more than $50-million.
But even here, Mr. Gibbs says the deals were for "multi-product portfolios; and in some cases includes credible and extensive commercial and R&D infrastructure." Given that, he says, "Our preliminary impression is that Paladin's bid is generally consistent with what Valeant is paying."