Valuation

GK 8/25/14

Valuation

TRANSCRIPT:

GARY: “Intermune was bought out today by Roche Holdings. Why do I bring this up? Because we are simply told not to worry about froth and speculation and that is all well and good. Just want to let you know a couple of things that I noticed on Intermune today. First off, they have done two secondaries in the last year. In case you don’t know, that is adding stock onto the market or insider selling, whatever you want to call it. So, they are selling stock. And, of course, the year has been a good year for biotech and Roche decided to buy them, I think for 74 in cash. They are paying cash. You would think that when someone is paying cash that they would like to look at valuation. Ladies and gentlemen, here is the valuation on Intermune. Trailing fourth quarter sales, $110 million. How much money did they lose on that $110 million of sales? Looks to me about $200 million. We are not making this up. They did $110 million in sales but lost $200 million. Remember those numbers. Roche is paying in the neighborhood of $7.5 billion dollars, for a company that had a $110 million in sales and lost $200 million. But, there is no bubble. We are told there is no bubble. They are willing to pay nearly $8 billion dollars for a company in $100 million in sales and lost $200 million dollars. Just letting you know, they could have bought them a year ago for $1.5 billion. Anyway, this is a part of what we talk about froth and speculation and excessive valuation and by the way one of the characteristics is the buyouts at high prices, not just secondaries. We are just stating the facts. We are just letting you know. Not saying anything else, just stating a fact.”