Some brief thoughts on a possible NPS sale

Tuesday, 6-January-2015

NPS Pharma (Nasdaq: NPSP) was in the news yesterday because it was widely reported they have hired Goldman Sachs to help explore a sale of the company.

 

This is interesting news because one thing I am 100% sure about is that the executives at NPS do not actually want to sell their company.  They are within weeks (Natpara’s PDUFA is January 24) of receving a second major approval of a rare disease drug, and companies usually reach a nice inflection point when they make it that far.  Why sell when things are just getting good?

 

Furthermore, one thing you will hear NPS executives mention frequently is their “ten-in-ten” plan.  In other words, they want to develop ten new rare disease drugs over the next ten years.  While that is a lofty goal, having it at least suggests they are long-term thinkers and want to build NPS into a significant leader in rare disease one day.

 

So what does it mean that they have now hired bankers to explore a sale?  I think it shows that Shire, a company who has been stalking them for quite some time, has already made an initial offer that is significant enough to assume a sale cannot be passed up.  It is going to happen one way or another.  Therefore, in authorizing the wider sale process, NPS’s board of directors is simply doing the standard due diligence work that is customary in these situations.  It is their responsibility to see if any higher offers are out there.

 

For people who trade or own the stock, this represents a reasonably safe base since the Shire bid is likely in the background.  The media reports suggest NPS could sell for $4.5 billion, which would be about 10% upside from here.  However, given NPS’s reluctance to sell, I really think they would require a better price.  High $40’s, and perhaps even a number that starts with a five, would be more like what it takes to seal the deal in my opinion.

Who Am I?

I'm an individual investor from Kansas City.  My focus is on biotech stocks, but I enjoy investing in all industries. I'm an old-school, buy and hold investor who believes the best way to outperform and grow capital is to own innovative companies with good management teams over the long-term. more>>

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