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Another day and another drop in SP. There seems to have been significant selling pressure on AMYT even before the recent news. However, the MMs were controlling the price tightly up till last week - large sells were getting matched to similar large buys with minor overall price movements. All very difficult to understand!
In order to get major shareholder approval, I suspect the relative valuations of the two companies were based on the share price of the recent fund-raisings.....$4 for Chiasma and $12.50 for Amryt. With Chiasma trading at $3 before the announcement, the share price went up. Amryt was trading around $13.5 and went down. The deal was probably done when Amryt did its December fund-raising. Just a guess.
WIth the significantly increased valuation post-merger, I wonder will Amryt move off the AIM market onto the main market. This would bring in institutional investors that don't normally buy on AIM with a possible re-rating of the price and better liquidity.
I really like the TPE Technology Platform. I wonder what is its potential in developing re-formulations of existing drugs.
I fell into this share by accident because of Fastnet, but have grown to like it. Hopefully good times ahead.
Thanks Diamondstar
When Amryt raised $40m last December, I thought they were in the market to buy another drug to add to their portfolio. This was one of their key objectives to better leverage their sales infrastructure. I had expected they might buy a cast-off drug from one of the big players with just a few years left in the patent life-cycle because of the limited cash they had raised.
I was really pleased to see that they used shares to buy a drug that has just been launched in the market and fits in to their own offering with real potential and synergies. Chiasma has a US sales team in place but with Amryt, MYCAPSSA can be launched through the Amryt worldwide network as well.
Chiasma raised $70m at $4 per share last July. They had $115m in cash at end March, most of which will be used to clear debt. Amryt has $118m.......so between them they are well positioned to see MYCAPSSA through a successful rollout.
Chiasma shares were $7 last June before the fund-raise and then fell to $3 earlier this year. After the announcement they recovered to $4. The drop in the Amryt price is probably due to traders taking advantage of the arbitrage opportunity.
The merger allows MYCAPSSA to be launched worldwide, leverages Amryt's existing sales network at minimal cost and provides funding for the further development of Chiasma's TPE technology platform and the IND.
I think its a fantastic deal for both companies and expect the share price of the combined company will start rising.
You could be right Diamondstar..
Problem is execution..
By the time the deal closes how much of Chiasma's $115 million will be left?
They're burning thru $30+ million a quarter..
Then there's the legacy issue with HCR.. If they get acquired there's a lump sum payment of $126.4 to HCR.
So how much will it cost Amryt in cash? (is that the reason they raised $40 million recently,knowing its for the lump sum payment?)
So for me I'll sit on the sidelines for awhile. There isn't that much liquidity in Amryt's shares so the arbitrage guys will probably sell Amryt and buy Chaisma until they get closer to the finish line.
Bronxville - let me try to explain why Amryt paid 300 million for 1.8 million in revenue. Firstly, MYCAPSSA was only launched recently in USA, about 6 months ago. Hence, the USD 1.8 million revenue likely represents 100 acromegaly patients already on the drug.
By the end of this year, I would expect 300 patients on the drug, which would represent an annual revenue of up to USD 18 million. At the moment, it looks like they may be getting 10% market penetration, as 3000 new acromegaly patients are diagnosed in USA/year. In addition, there are 25,000 existing acromegaly patients in USA at present, who may switch from injectable octreotide/Lanreotide to MYCAPSSA.
Within 2-3 years, I believe that a target of 1000 patients on MYCAPSSA in USA could easily be achieved. With EU approval, the number could be easily doubled to 2000 patients (which would represent USD 120 million annual revenue). Within 3-5 years, I believe annual sales of USD 200-300 million is achievable.
Further uplift in this figure could be achieved if 1) The market penetration in the newly diagnosed acromegaly population is higher eg 20% 2) More patients decide to convert from injectable to oral somatostatin therapy 3) Amryt achieves approval in GEP-NET indication (whereby revenues could easily be doubled).
This deal is going down like a lead balloon in America where they could be expected to understand the merits / demerits of Chiasma.
Post close Nasdaq price of $11,03 per ADR = some £1,59 UK per share.
Not good.
Ray S would have saved a bundle if he had waited to buy after the announcement.
Amryt paid almost $300 million for a company that had $1.8 million in Revenues
Reason is probably there's no reason to buy Amryt shares right now. Assuming the deal closes, you can buy Amryt right now for 140p by simply buying Chiasma shares. That's a big discount.
Amryt said the deal, which would grant it access to Mycapssa, Chiasma’s hormonal disorder drug, would create a global leader in treatments for rare diseases.
It has been approved and recommended by the boards of both companies. Amryt said yesterday that the plan would deliver annual cost synergies of approximately $50 million.
Reason for London fall in SP?
A London-listed biotechnology company specialising in rare diseases has agreed to buy an American rival.News of Amryt Pharma’s $296.7 million all-stock deal for the US-based developer Chiasma propelled shares in its target up by 38.7 per cent to $3.94.
Good point, Bronx.
Until the deal closes in the 3rd quarter..
Really?
Enlighten me..
A few delayed big buys, always a good sign.
I did. It says Chiasma needs to pay 126M max when acquired; it also has appr. 115M in cash itself. Seems Amryt will basically get the assets without the cash and with the royalty agreement paid off.
Read the 10Q page 19
If Chiasma is purchased
https://ir.chiasma.com/static-files/22ad13e3-4ed5-4183-92ea-5a1ad1613377
Chiasma has a substantial cash position (115M) itself, most of it in marketable securities.
The merger agreement says the following "Chiasma’s existing royalty interest financing agreement expected to be fully repaid on closing delivering a high margin unencumbered asset to Amryt’s portfolio"
Seems like most of Chiasma's cash will go towards paying off that royalty agreement. You might like that, or you might not like that, but seems like that agreement won't be paid off using Amryt's cash.
I think the rationale behind the deal is pretty easy to follow. Amryt will probably try to sell Chiasma's products through its existing sales network, and take out Chiasma's sales network best they can. 50M in synergies annually for companies of this scale is pretty significant. Amryt did a pretty good job of this when they bought the Aegerion assets and they think they can do the same trick again. In theory, it makes sense. Cheaper to have one sales network than two.
They've done 1 before, Aegerion...
and while it has been a good fit shareholders from 2016 have not done so well compared to the market.
don't you think the buy-out price derived would've taken into consideration what you have highlighted? These guys arernt amateurs? theyve built billion $ pharmas before.. not one but a few.....
Cheers, always like a good dig around a new acquisition, I was surprised to find something like this so quickly, as with a 40/60 split you'd expect hidden gems not barbs... I started a position in INS a few days ago - as with AMYT it's very under the radar, but looks to be a really solid growth company at an attractive valuation. They provide software solutions for FDA filings / compliance - it's a little dry but well worth some research, as that market is only going to grow IMO.
Have to say ShearClass you know your #'s..fair play excellent Due Diligence..
Any suggestion for the cash I have burning a hole in my pocket from my recent sale(:
Forgot the 10Q link; https://ir.chiasma.com/static-files/22ad13e3-4ed5-4183-92ea-5a1ad1613377
Worth looking through the 10-Q that was filed today by Chiasma, they have quite a tasty deferred royalty agreement in place, detailed on page 19. Currently showing as a $73m liability on the balance sheet... the crux being that HCR agreed a financing package with Chiasma for $75m in exchange for a low double digit royalty on the FDA approved drug.
Also just spotted this; "If a change of control of the Company occurs, we must immediately repay HCR the total amount actually funded (including unfunded amounts conditionally eligible to be funded) plus a change of control premium, the amount of which is variable up to 95% based on timing and circumstances of such change of control. Accordingly, if the Merger closes (see Note 1), payments up to approximately $126.4 million, inclusive of the change in control premium, will be due and payable at such time."
Just what AMYT needs, another horror show for the balance sheet.