BPAX Merger A Great Deal for ANI; BPAX Could Trade Lower

BioSante Pharmaceuticals (NASDAQ:BPAX) on Thursday entered into an all-stock merger agreement with emerging generic drug manufacturer, ANI Pharmaceuticals, causing BPAX shares to swing between $1.89 and $1.45 so far today, as the market tries to figure out the deal. The transaction looks like a good one for ANI, based on our initial look. The private company focuses on developing and selling niche generic drugs, and has a contract manufacturing business, with total sales for ANI of about $16M in 2011. Since we know little about ANI’s growth prospects and profitability, assigning a 1x revenue valuation seems prudent at this point. Adding the $42M in cash from BPAX, we estimate the resulting entity’s – which will be called ANI Pharmaceuticals – valuation at $58M. According to today’s announcement, BPAX investors will own 47% of the new entity, or $28M in value, roughly a 33% discount to the intrinsic value of BPAX (essentially its cash).