Nice write up, was looking forward to this one. How concerned are you about the class action? I can’t seem to find recent updates on it, doesn’t appear to have much press coverage. It makes me nervous though (having little biotech experience myself). Also looks like they settled a litigation with a competitor for a generic WAKIX drug, favorable to Harmony’s IP.
Regarding the lawsuits with Scorpion Capital, it’s hard to know for sure. If you dig deep enough into any company, you’ll usually find some kind of lawsuit. But with a small to mid-cap company like this, it seems to have a bigger impact compared to much larger companies — or at least, that’s how the market seems to react. My guess is they’ll settle sometime within the next two years. Looking at similar situations, settlements tend to range between $50 million and $200 million.
I re-ran the bear case DCF assuming a $100 million settlement, then again with a $200 million settlement. I took that amount directly off the company’s initial cash position to simulate an immediate impact. For a $100 million settlement, I got a 16% IRR, and for $200 million, it dropped slightly to 15%. So, it definitely matters — both financially and reputationally.
That said, there’s also potential upside here. Either the lawsuit gets dropped altogether, or the settlement ends up being less severe — say, in the $10-50 million range. I would think either would result in a decent price movement.
On the settlement front, I read some new info today — good news for them. The recent patent settlement pushed generic competition back by over a decade.
Nice write up, was looking forward to this one. How concerned are you about the class action? I can’t seem to find recent updates on it, doesn’t appear to have much press coverage. It makes me nervous though (having little biotech experience myself). Also looks like they settled a litigation with a competitor for a generic WAKIX drug, favorable to Harmony’s IP.
Thanks for reading!
Regarding the lawsuits with Scorpion Capital, it’s hard to know for sure. If you dig deep enough into any company, you’ll usually find some kind of lawsuit. But with a small to mid-cap company like this, it seems to have a bigger impact compared to much larger companies — or at least, that’s how the market seems to react. My guess is they’ll settle sometime within the next two years. Looking at similar situations, settlements tend to range between $50 million and $200 million.
I re-ran the bear case DCF assuming a $100 million settlement, then again with a $200 million settlement. I took that amount directly off the company’s initial cash position to simulate an immediate impact. For a $100 million settlement, I got a 16% IRR, and for $200 million, it dropped slightly to 15%. So, it definitely matters — both financially and reputationally.
That said, there’s also potential upside here. Either the lawsuit gets dropped altogether, or the settlement ends up being less severe — say, in the $10-50 million range. I would think either would result in a decent price movement.
On the settlement front, I read some new info today — good news for them. The recent patent settlement pushed generic competition back by over a decade.