Interesting views of Hoosier about acquisiton and buy-out

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Fishermangents
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Interesting views of Hoosier about acquisiton and buy-out

Post by Fishermangents » Thu Aug 25, 2016 1:31 pm

(by Hoosier, Seeking Alpha 24 August 2016)

"In my opinion, Geron management is very serious about their effort to identify potential acquisition candidates. I say this because their long-term corporate strategy is a function of their ability to identify suitable acquisition candidates.

Based on the pilot study results and Janssen's support, I believe Geron management is confident they will obtain regulatory approval for one (or more) of the heme indications (MF, MDS, AML) that are currently under study and/or clinical trial. Such confidence affords them the luxury of being selective and patient with their acquisition search efforts. To paraphrase Jimmy, there are lots of reasons for Geron to make a near-term acquisition, but one main reason (i.e. their confidence in Imetelstat and/or Janssen) they don't feel the need to rush an acquisition.

Any one (or more) of these approvals will result in significant (+) cash flows to Geron. Such positive cash flows will ultimately need to be invested or returned to shareholders. If Geron can identify a good acquisition (or merger) opportunity, their corporate strategy will become a long-term growth strategy. If they're unable to identify a suitable opportunity, their corporate strategy will most likely involve being acquired by Janssen, Incyte, Novartis, or Celgene following regulatory approval for MF and/or MDS.

Barring a tender offer from Incyte or Novartis, I don't believe Geron will be acquired prior to a formal regulatory approval. This is because Geron management is well aware of the Cash Flow and EPS potential associated with the regulatory approvals. Thus, any early and relatively-low purchase offer will be spurned by Geron management. On the flip side, JNJ management has repeatedly stated early and/or mid-level acquisitions are of interest to them. Thus, a mid-level acquisition of Geron (by JNJ) seems a compromise possibility once the regulatory approvals are obtained or highly certain. Assuming no acquisition prior to that time, Geron could justify accepting a buyout from JNJ so long as it's at, near, or above the calculated NPV associated with their likely regulatory approvals. On the flip side, JNJ could justify such a mid-level acquisition as it would represent a 'fair deal' with regard to NPV, simplify the Imetelstat decision-making process by eliminating the collaboration agreement, avoid the cost of tracking/paying royalties into 2033, and eliminate the risk of Geron being acquired by a non-friendly competitor of JNJ.

For now, I believe Incyte, Novartis, and Celgene (Revlimid) are happy to watch from the sidelines. They'll monitor the situation as Janssen does all of the heavy lifting in pursuit of regulatory approvals. The competitive threat posed by Imetelstat won't be quantifiable until Phase 2 results are known. Thus, I wouldn't expect any competitive actions until such a time, and this is likely a major reason for Janssen clamping down on preliminary trial results.....to help keep competitors at bay."

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