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Msg  61742 of 62418  at  2/22/2021 8:52:07 AM  by

valuationguy


Longboard = distraction for Arena...period

This is the third go-round of the angst over Longboard and its spinout....and I personally am sick of the reaction of some on the board (many of whom are obviously short Arena shares imo).
 
It's not enough for them that three (or more) early development compounds which Arena itself didn't want to pursue might be licensed to another group who DID want to.  It's not enough that Arena maintained a material stake in Longboard AS WELL AS having a royalty on NET SALES of all three of Longboard's compounds (very likely in the low double digit percent range).
 
Arena was doing essentially NOTHING with these compounds until Longboard was formed....because it didn't want the additional expenses and RISK.  Given that any discovery (which gets patented) is a WASTING ASSET as soon as the patent date is claimed...Arena essentially is GETTING VALUE now from an asset that previously NO ONE CARED ABOUT. 
 
Olorinab is very different from the drugs Longboard is working on....and the indications that Longboard is pursuing is DIFFERENT from what Arena management believes Olorinab will work against....so where is the HARM to Arena?  Additionally...as I...and every Wall Street analyst btw...has made crystal clear over the past two years, the expectations (and assigned value) on Olorinab (ahead of the phase 2 data at least) is worth nearly NOTHING to Arena's current stock price.
 
Kevin Lind (former Arena CFO) highly believed in the value of Longboard....so much so that he LEFT Arena (a company he helped pull out of the ashes of the attempted (and ultimately successful) assassination (imo) of lorcaserin by certain individuals at the FDA) AND invested his own capital in Longboard last Oct.   If he is willing to round up investors and pursue these compounds when Arena affimatively chose NOT to....more power to him.  If ultimately these compounds develop real value...he gets rewarded for taking a big risk....and Arena (and its investors) STILL get rewarded for its continuing stake (however diluted) and STILL gets to collect a royalty if the compounds get to market.
 
In the first go-round...the shorts were complaining that Arena was giving away the kitchen...attributing nearly $1-2B of value to Longboard (when Arena was itself only $2.25B in Jan 2020)...and I laughed at them pointing out that the likely Street value of Longboard in an IPO was less than $50-$75M for a 50% stake.   
 
Come last October, the private round of funding added $54M for a 2/3 stake (less than I has previously thrown out off the cuff in Feb)...and now the IPO will probably dilute current stakes by 60-70% for an additionally $86M (or as much as 75% for $100M if overallotments are taken).  Despite all the equity dilution (past, present, or future)...Arena still gets value if Longboard is successful due to the built in royalty agreement...which NEVER gets diluted. 
 
So all the long-term investors here need to start ignoring the posts which criticize Arena for spinning out Longboard because those negative posters have zero leg to stand on....
 
VG 
 
 
VG 


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Replies
Msg # Subject Author Recs Date Posted
61743 Re: Longboard = distraction for Arena...period Bioimmuno 2 2/22/2021 9:37:38 AM
61745 Re: Longboard = distraction for Arena...period link1 0 2/22/2021 9:47:15 AM








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