"So what of other market participants? These include Roche/Genentech, AstraZeneca, Pfizer and Celgene amongst others. Each of these have IO assets either in development or with one approval, however, it is likely that each of them will take years to gain market share in the absence of at least equivalence, or better yet, superior efficacy. Although Viralytics and Merck have a long collaboration history which has enabled Merck to attain a complete and thorough understanding of Cavatak, each of these other developers could consider a counter bid. The likelihood of this increases if further clinical trial data emerges between now and the completion of the Scheme meetings in late May. Balancing this argument, Viralytics is one of numerous developers with an adjunctive therapy for IO drugs. It is probable that other data is available that is not in the public domain, or that the major pharma groups have their own internal candidates. CONCLUSIONS It is far from certain that a competing bid may emerge; The 160% upside to the 1 month VWAP is a considerable premium; The all cash bid together with the unanimous support of the Viralytics Board provides certainty for VLA shareholders; and The bid is within 19% of our adjusted target price and well within a valuation which we consider fair and reasonable. The bid also has support of the company’s largest shareholder (in the absence of a superior competing bid). For these reasons we recommend shareholder agree to accept the Merck bid. In our view there is little to no downside in holding the stock until the Scheme meeting – in the unlikely event that a superior bid emerges."
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VLA Price at posting:
$1.69 Sentiment: None Disclosure: Held
