Theravance Inc (THRX) has partnered with GlaxoSmithKline (GSK) to develop three respiratory drugs for the treatment of COPD and asthma, and THRX will see an annual royalty of $500 million or more and a value of roughly $51 a share when the drugs make it to market, says Ian Somaiya, Managing Director and Senior Research Analyst at Piper Jaffray & Co.
“When we value the cash flow stream that’s resulting from this royalty, we can get to a value of roughly $51 a share for THRX. The stock’s trading at $23. The most risky of the three drugs, Breo, is scheduled to go before an FDA advisory panel meeting on April 17 and has a PDUFA date of May 12, so that question is going to get answered relatively soon,” Somaiya said.
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Breo has since received approval from the FDA advisory panel. Should the drug get ultimate approval from the FDA and go to market, Somaiya expects investor appetite for THRX to increase and the company to be set up for acquisition.
“I think Glaxo would likely come in after the approval of this drug Breo and acquire Theravance, or at least the portion of Theravance that they don’t already own; Glaxo owns roughly 27% of Theravance today. So that’s probably the one I would highlight as a potential near-term M&A candidate,” Somaiya said.
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