How do you price a biotech company like Actelion?

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Bloomberg sat down to crunch the numbers on a potential takeover of Switzerland's Actelion and concluded that the biotech could fetch around $9.8 billion if Amgen ($AMGN) or some other suitor swoops in to take it over. The news service based that number on the average of five projections made by analysts in recent days, adding that that would be the most paid for a European biotech since Merck KGaA acquired Serono back in 2007 for $14 billion.

But the Bloomberg numbers--inspired by the persistent market rumors flying around a potential takeover attempt--also highlight the math in play when a biotech company is up on the auction block. Over the past five years biotech buyers paid a median of 1.37 times market value to complete a deal, which pegs Actelion's value right at that $9.8 billion figure.

Of course, any long-term biotech observer knows that nothing is all that simple in the drug development business. Coming up with an exact valuation is harder in biotech than most other industries because there are so many variables in play.

Actelion's cash cow is the PAH drug Tracleer, which loses patent protection in 2015. And the company has two more PAH drugs--macitentan and selexipag--in late-stage development to protect its market position. That's a plus. But a late-stage study of Actelion's insomnia drug, almorexant, produced some troubling safety issues to contend with. And regulators hate safety issues when associated with a sleep drug, which is likely to be taken regularly over a long period of time. Actelion's experimental clazosentan also failed a clinical trial. Those are minuses. Finally, if a takeover turns hostile, analysts fret about the potential loss of brainpower--the core asset that created the value to begin with--if top execs emigrate after a merger.

Of course, Actelion CEO Jean-Paul Clozel has repeatedly vowed that the company wants to remain independent. And as the Financial Times noted today, Abbott Labs ($ABT) and Bristol-Myers Squibb ($BMS) could look to tie up with Actelion in some fashion as well. And that could be a pricing factor all by itself.

- read the story from Bloomberg
- and here's the Financial Times report

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