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No. of Recommendations: 9
As an ABSC shareholder, I appreciate CV's useful post, and agree that the emotional belly aching has not been insightful.

Both companies are high risk, and lets hope high reward. Accordingly, both have very volitile stock prices. ABSC shareholders are not getting bought for $24 a share. We will not see any cash. We are being bought for 0.62 shares of VRTX per ABSC share. Put another way, a new company is being created, and ABSC shareholders will own 20% of it. Both companies have had thier stock prices much higher over the last year, and lets hope to see that again.

Evaluating the offer on terms of dollars is of little use. You have to value the combined company, and see what you think. I plan to follow up on CV's links an do a little DD. I would recommend www.aurorabio.com
Aurora has a lot of different technologies and projects going on - spend some time reading through the website.

One initial positive reaction I have is this. I believe the big money in biotech is from the drugs. We saw CRA say it will head that way, and Aurora has as well. But Aurora does not have its own pipeline and so far is at the mercy of collaborations with other pharma companies. It must be the case that it is stronger for a business to have its own ability to develop and commercialize drugs. Even if the company does collaborate with Big Pharma, it will be able to negotiate from strengh because it has a real alternative possibility: inhouse. Anyway, developing its own drug pipeline would be a huge endevor for Aurora - they may have nailed the first stage of candidate identification, but have no expertise or experience in clinical trials, FDA negotiations, manufacturing, or marketing. But VRTX does. Actually has a drug for sale (can't say that of MLNM or HGSI). Aurora just catipulted its ability to capitalize on its own discoveries.

Also in biotech, there is so much expensive failure, that diversification is always a huge boon. Aurora will now have, what, 7 or 8 drug candidates in clinical trials? And VRTX will have an established picks and shovel company, with many established collaborations generating substantial revenue, to diversify beyond drug development (while at the same time locking in a great engine to generate new drug candidates). The combined cash position of the company will be solid.

I would be a bit annoyed if one of my venture risk biotech was bought early on by big pharma, because the risk/reward ratio I sought would go from high/high to moderate/moderate. But here there seems to be more or less a similar ratio - the potential upside for the combined company is huge, clearly Boger (VRTX CEO, right?)is incredibley ambitious and aims to be bigger than Pfizer. Go boy go. At the same time, we diversify a bit have reduce some risk.

Lastly, I realize that my ability to evaluate the science is incredibley limited in biotech. I essentially have to look to secondary sources for hard information. One of many places to look is the heathcare companies themselves. For example, if Bayer invests heavily in MLNM, the folks at Bayer obviosuly must think highly of MLNM. Simiarly, if you respect the folks at Aurora, you respect thier evaluation of the science and business prospects of VRTX. You also respect their opinion that Aurora is worth 20% of the combined company. They do, clearly, have very different motivations that I do (it is thier day to day job, they have salaries, and mergers can trigger the exercies of stock options that may otherwise be tied up). But bottom line, those guys own a heck of alot more Aurora stock than I do, and are getting the same .62 shares of VRTX.
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