Thoughts on an ARNA Buy Out Price

Hi Everyone,
Saul just passed along an article:…

The author used 3X sales of ralinepag and 30% market share for pulmonary arterial hypertension to estimate a buyout price. ralinepage alone would place ARNA’s buyout price at $3.8B. Of course this is pre Phase 3 results. After Phase 3 results, biotechs usually go for about 8X peak sales expectations, so that would place ARNA at $10B. Please remember, ralinepag is the consolation prize. Ralinepag is a far riskier drug, because it’s efficacy as a PAH drug is not as proven, IMO, as Etranimod. For Phase 3, we should expect a 60% chance that ralinepag will apply for approval, and an 80% chance the application will be approved. Put that together, and you are looking at 48% chance for success.

On the other hand, Estranimod is being prepared for a Phase 3 trial as a S1P modulator. The thing is S1P modulators have been used for 10 years - only Arena’s version does not have two receptors associated with severe cardiac side effects. This looks like a proven, odds on bet to be a blockbuster. In Estranimod’s case, I think we are looking at an 85% chance of approval, with peak sales something like $4.5B from the ulcerative colitis market, which gives us a nifty $36B buy out price. Add on a possibility of another $10B, to reach a potential upside of $46B.

Most likely, we won’t see that because I think Arena will be purchased well before that. The price. Who knows? If we get good ralinepag results, I wouldn’t be surprised to see Arena purchased for $25B. Quite a jump from our $2B market cap today.

Sound crazy?



PS We also have an additional non-opiode pain medication in the pipeline too, and we might be able to wring more out of that too.