Is Takeda overpaying by offering $ 9 billion for Millenium?

Takeda is offering almost $ 9 billion for Cambridge, MA based Millenium Pharmaceuticals. This is a 53 % premium on yesterday’s closing price. Millenium’s only commercial drug is Velcade, which competes with Celgene’s Revlimid. Recent favorable clinical trials are supporting a sustained revenue growth of at least 20% for Velcade. Johnson & Johnson is marketing Velcade outside of the US and co-promoting in the US.

However with only 6 years patent life left, the value of Velcade is probably in the $ 2-3 billion range based on discounted cash flow calculations. That leaves a $ 6+ billion valuation for the early pipeline – no product is beyond phase II. This is very high but maybe a similar situation to AstraZeneca beefing up its biologics capability and pipeline through the $ 15 billion acquisition of Medimmune.

Big Pharma, including Takeda- with Prevacid and Actos patent expiring soon- is facing a huge cliff in the early 2010s and betting on specialty products and biotechnology. With more deals to come,  valuations for quality biotech companies should fare well in a depressed stock market.

Wall Street Analysts cheer Millenium Pharma

 

Millenium Pharmaceuticals (NASDAQ:MLNM) is a new favorite among Wall Street Analysts. The favorable clinical results for Velcade help MLNM rise 38% in 2007. Now a survey of 50 Oncologists treating Multiple Myeloma lead Analyst Howard Liang of Leerink Swann to conclude that Velcade and rival Revlimid from Celgene (NASDAQ:CELG) may split equally first line treatment. This is an important trend for Velcade, an injectable drug, generally considered an underdog to oral drug Revlimid. Lehman Brother analyst Jim Birchenough predicts 4th quarter 2007 sales of $ 81.2 million for Velcade, more optimistic than Millenium estimate of $ 73.9 million and previous Wall Street estimates at $ 66. 3 million.

Velcade sales are also strong in Europe, where it is marketed by Johnson & Johnson and its price is higer than in the US.

On January 2nd, 2008, Millenium Pharma was up 8.1% closing at $16.19. Millenium Pharma’s CEO, Deborah Dunsire, MD, will be presenting at the JP Morgan Conference in san Francisco on January 9, 2008 at 3.30 pm PST.

source: Forbes and Associated Press